Gold Prices Drop Amid Iran Peace Talk Uncertainty and Stronger Dollar

Gold prices fell sharply on Thursday as mixed signals from President Donald Trump regarding Iran peace negotiations rattled investors, while a strengthening U.S. dollar added further downward pressure on the precious metal.

Spot gold dropped 2.8% to settle at $3,378.81 per ounce, while gold futures declined 3.9% to close at $4,407.50 per ounce. The pullback came after bullion had briefly climbed back above $4,500 per ounce earlier in the week, buoyed by a softer dollar and cautious optimism surrounding U.S.-Iran diplomatic efforts.

Market analysts noted that gold is currently trading within a defined range, with the mid-$4,500 level serving as a key resistance zone. Until prices can break through and sustain that level, upward rallies remain vulnerable to selling pressure.

Interestingly, safe-haven demand has shifted toward the U.S. dollar rather than gold. Concerns that an Iran-related energy price shock could reignite global inflation have prompted speculation that central banks may revisit interest rate hikes. Since gold is a non-yielding asset, a higher-for-longer rate environment reduces its appeal to investors. According to CME Group's FedWatch Tool, markets are now pricing in approximately a 38% probability of a Federal Reserve rate hike by December.

Despite gold's reputation as a top inflation hedge and safe-haven asset, bullion prices are down roughly 21% since the onset of the conflict and nearly 27% from their all-time highs in late January. Analysts attribute this counterintuitive decline to surging crude oil prices, rising Treasury yields, delayed rate cut expectations, and a hawkish Federal Reserve stance — all of which have collectively undermined gold's relative attractiveness.

Trump's conflicting statements about Iran — suggesting Tehran was seeking a deal while also expressing doubt about reaching one — continued to fuel market uncertainty, keeping both investors and traders on edge.