Gold prices fell during Monday’s Asian session after President Donald Trump rejected Iran’s latest proposal aimed at ending the 10-week conflict in the Strait of Hormuz, increasing concerns about inflation and higher interest rates.
By 3:40 pm AEST (5:40 am GMT), spot gold prices were down 1.2% at US$4,661.20 per ounce.
The decline came after both Washington and Tehran rejected each other’s proposals to end the conflict, undermining hopes for a durable ceasefire in the Middle East.
Trump described Iran’s latest response to the U.S. peace proposal as “totally unacceptable”, while Iranian officials said Tehran would reject any agreement forcing the country to accept what it described as excessive U.S. demands.
Iranian authorities also stated that the United States should compensate Tehran for damages caused during the conflict.
The renewed tensions contributed to rising concerns about prolonged supply disruptions through the Strait of Hormuz, increasing the risk of higher energy prices and broader inflation pressures.
Higher inflation expectations have reinforced the prospect of elevated interest rates, which typically weigh on gold because the precious metal does not generate yield.
Gold is commonly viewed as a safe-haven asset during periods of geopolitical instability, although rising interest rates can reduce its attractiveness relative to income-producing investments.
Analysts at ANZ said central bank demand continued to provide underlying support for the gold market despite recent volatility:
"Gold prices gained last week as buying interest emerged despite clashes between Iran and U.S. threatening to dampen risk appetite.
"Those buyers include central banks, which had been quiet earlier this year. Gold held by the People's Bank of China rose by 8.1t in April, the most since December 2024, according to official government data.
“Poland’s central bank is also buying gold as it looks to diversify its foreign currency reserves.”
The latest U.S. labour market data also remained in focus for investors assessing the outlook for Federal Reserve policy.
Figures released on Friday showed U.S. nonfarm payrolls increased by 115,000 jobs in April, exceeding market expectations of 62,000 jobs, although hiring slowed from the revised gain of 185,000 recorded in March.
The Bureau of Labor Statistics (BLS) also reported that the unemployment rate remained steady at 4.3% in April, matching market forecasts.
While the stronger-than-expected employment data suggested resilience in the U.S. economy, investors remained cautious over signs that the labour market may gradually be slowing amid persistent geopolitical and inflation risks.
