Gold prices edged lower during Asian deals on Monday, retreating from earlier gains as a stronger United States dollar weighed on the precious metal amid escalating tensions in the Middle East.
Spot gold fell 0.6% to US$4,720.55 per ounce by 3:45 pm AEST, after briefly rebounding from an early session test near US$4,644.22.
The decline came as the U.S. dollar index (DXY) strengthened, supported by safe-haven demand following the collapse of ceasefire talks between Washington and Tehran.
Investors have increasingly turned to the greenback as uncertainty surrounding the two-week truce intensified.
Markets remain on edge after negotiations in Pakistan failed to yield a breakthrough, raising doubts about the durability of the fragile ceasefire agreement.
U.S. President Donald Trump escalated rhetoric over the weekend with plans to impose a blockade on the Strait of Hormuz and reiterating warnings of potential strikes on Iran’s energy infrastructure.
According to The Wall Street Journal, Trump and his advisers are also considering limited military action in response to the breakdown in talks.
The U.S. military confirmed that enforcement measures are imminent. United States Central Command said forces would begin blockading maritime traffic entering and exiting Iranian ports from Monday.
In response, Iran’s Islamic Revolutionary Guard Corps warned that any military vessels approaching the Strait of Hormuz would be treated as a violation of the ceasefire and met with a decisive response.
The prospect of escalating naval activity in the region has heightened concerns over global oil supply disruptions, which could push inflation expectations higher and complicate the outlook for monetary policy.
This dynamic has supported the U.S. dollar, as expectations for tighter policy persist. In contrast, non-yielding assets such as gold tend to come under pressure in a higher interest rate environment, limiting the metal’s upside despite ongoing geopolitical uncertainty.
