Gold Prices Slip as Strait of Hormuz Blockade Fuels Risk-On Sentiment

Gold prices edged lower on Monday as investors rotated into riskier assets, brushing off escalating Middle East tensions despite a U.S. blockade of the Strait of Hormuz. Renewed optimism around ongoing diplomatic efforts, even after weekend peace talks between the U.S. and Iran collapsed following 21 hours of negotiations in Pakistan, helped lift risk appetite across markets.

Spot gold fell 0.1% to $4,745.13 per ounce, while gold futures declined 0.4% to $4,768.07 per ounce as of 15:55 ET. President Trump confirmed the blockade took effect at 10:00 ET, restricting vessels headed to or departing from Iranian ports, though the Pentagon clarified that ships transiting the strait without Iranian port stops would be permitted passage.

Oil prices briefly surged past $100 per barrel before retreating, rekindling inflation concerns globally. U.S. consumer price data released Friday showed inflation accelerating sharply in March, driven primarily by war-related spikes in gasoline costs. The prospect of prolonged elevated oil prices has prompted some investors to scale back Federal Reserve rate cut expectations for 2026, with the CME FedWatch tool showing only a 27% probability of a December cut.

Rising interest rate expectations have weighed heavily on gold, which offers no yield. The metal has lost over 10% since the conflict began in late February. A strengthening U.S. dollar, buoyed by safe-haven demand, has added further pressure by making gold costlier for international buyers.

Analysts note that gold's traditional role as a crisis hedge appears to be weakening. Senior market analyst David Morrison of Trade Nation pointed out that the dollar-gold inverse relationship is currently dominating price action. Bulls are targeting a break above $4,800 to spark a sustained recovery, while bears eye a potential retest of $4,400 support.