Gold prices edged lower in thin Asian trading on Monday as persistent inflation concerns clouded the outlook for United States monetary policy, while investors monitored developments in U.S.-Iran peace negotiations.
By 3:45 pm AEST (5:45 am GMT), spot gold declined 0.4% to $4,597.00 per ounce, with trading volumes subdued due to public holidays in China, Japan and the United Kingdom.
Market sentiment has been shaped by rising uncertainty around the Federal Reserve’s policy path, particularly following recent inflation data and the impact of higher oil prices linked to the Iran conflict.
Federal Reserve Chair Jerome Powell concluded his tenure last week with interest rates left unchanged, while concerns about inflation continued to build.
Several Federal Reserve officials who dissented from last week’s policy statement warned that the oil price shock stemming from the Middle East conflict could limit the central bank’s ability to cut interest rates, and may even necessitate higher borrowing costs in the future.
Elevated oil prices are seen as a key driver of inflation risks, potentially forcing central banks to keep rates higher for longer. This dynamic tends to weigh on non-yielding assets such as gold, as investors shift towards interest-bearing alternatives like government bonds.
Although oil prices eased slightly during Asian trading, they remained above $100 per barrel, supported by ongoing uncertainty surrounding a potential U.S.-Iran agreement and continued disruptions to shipping through the Strait of Hormuz.
Geopolitical tensions remained heightened after a tanker was reportedly struck by unknown projectiles in the strategic waterway, according to the United Kingdom Maritime Trade Operations (UKMTO).
The incident came shortly after U.S. President Donald Trump said Washington would begin assisting vessels stranded in the Gulf due to the conflict.
Meanwhile, Iranian state media reported that the United States had delivered its response to Tehran’s 14-point peace proposal via Pakistan, with Iranian officials now reviewing the terms.
Looking ahead, investors are preparing for a series of key economic events this week that could shape market direction. In Australia, attention will be on the Reserve Bank of Australia’s interest rate decision on Tuesday, where policymakers are widely expected to raise rates by 25 basis points.
In the United States, markets will focus on upcoming labour market indicators, including the ADP employment report, Job Openings and Labor Turnover Survey (JOLTS), and the official nonfarm payrolls report, all of which are expected to provide further insight into the strength of the economy and the trajectory of monetary policy.
