Quick Summary
- Gold decreased approximately 1–1.5% Thursday, settling near $4,441–$4,476 per ounce
- Contradictory messaging from Washington and Tehran regarding diplomatic negotiations has created market volatility
- Crude oil prices have surged past $100 per barrel while the Strait of Hormuz remains operationally blocked
- Federal Reserve rate-cut probability for 2024 has dropped to nearly zero, while rate-hike odds reach 38% by December
- The strengthening U.S. dollar is creating headwinds for gold by increasing costs for international purchasers
Bullion experienced a downward correction Thursday following two consecutive sessions of appreciation, as market participants digested competing narratives from U.S. and Iranian officials about the status of peace negotiations.
Spot gold declined approximately 1.5% to around $4,441 per ounce. U.S. gold futures experienced a steeper fall of about 2.5% to $4,457.
The precious metal had recovered above the $4,500 threshold earlier in the week following a substantial pullback, finding support from dollar weakness and tentative optimism surrounding diplomatic channels.
President Donald Trump characterized Iran as eager for an agreement, asserting that the nation had been militarily devastated. He also described Iranian negotiators as exhibiting unusual behavior.
Iran’s top diplomat countered these assertions, stating that while his government was examining a U.S. proposal, Tehran had no plans for official negotiations aimed at ending hostilities.
Market observers indicate gold has entered a consolidation phase. “In the short term, gold is confined within established boundaries,” noted Max Baecker, President of American Hartford Gold. “The market requires a sustained break above the mid-$4,500 level to establish a new directional bias.”
Kyle Rodda of Capital.com indicated that headline developments will dictate price action over the immediate period. “The most significant volatility will emerge early next week when there’s greater clarity regarding potential U.S. ground operations in Iranian territory.”
Crude Surpasses $100 Amid Hormuz Closure
Brent crude rallied past the $100 per barrel threshold Thursday. The Strait of Hormuz, a critical waterway accounting for approximately 20% of global oil and liquefied natural gas shipments, has been functionally impassable since U.S.-Israeli military operations against Iran commenced.
Crude had reached approximately $120 earlier this month before moderating. Current levels remain substantially elevated compared to pre-conflict benchmarks.
Elevated energy costs translate to increased transportation and production expenses, contributing to inflationary pressures. This dynamic reduces the likelihood of monetary policy easing by central banks, creating challenging conditions for gold given the asset generates no income.
Monetary Easing Expectations Evaporate
Prior to the outbreak of hostilities, financial markets had anticipated a minimum of two Federal Reserve rate reductions during the current year. That consensus has undergone a complete transformation.
Data from CME Group’s FedWatch tool indicates virtually zero probability of a rate reduction in 2024. Approximately 38% of market participants are positioning for a rate increase by year-end. Roughly 93% anticipate the Fed will maintain its current policy stance at the April meeting.
The U.S. dollar has appreciated as capital flows into defensive assets. Dollar strength increases gold’s price tag for non-U.S. purchasers, typically dampening international demand.
Trump emphasized Thursday morning that Iran should seek an arrangement with the United States while reiterating his position that Tehran’s military capabilities have been eliminated.
