Gold Prices Fall Amid Trump Administration's Ongoing Pressure on Iran

Global Markets in Turmoil as US-Iran Tensions Escalate

Gold prices plummeted by as much as 1.2% yesterday, marking a reversal from the 1.5% gain in the previous session, as traders weighed the escalating conflict between the US and Iran. The standoff between the two nations has dashed expectations for rate cuts from central banks worldwide, with the likelihood of interest rate hikes increasing and adding to inflation risks.

The nine-week conflict in the Middle East has caused an energy-supply shock, raising the stakes for non-yielding bullion. As a result, gold has lost nearly 14% since the conflict began at the end of February. In the near term, Citigroup Inc. analysts expect selling pressure on gold to remain strong due to Middle East uncertainty, particularly at higher gold prices and another wave of equity market correction.

Despite the recent slump, most analysts remain bullish on the precious metal. The World Gold Council reported that central banks added gold holdings in the first quarter at the fastest pace in more than a year. The decline in prices encouraged a wave of buying that more than offset sales by a handful of institutions.

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The trend of central bank accumulation remains intact, with continued retail buying in China supporting prices in recent months. A de-escalation in the Middle East and a dip in interest rate expectations and the dollar would mean "it's game-on again for gold," according to JPMorgan Chase & Co. head of precious and base metals research, Greg Shearer.

Spot gold fell 1.1% to $4,569.30 an ounce at 10:46 a.m. in London, while silver dipped 0.7% to $73.23 an ounce. Platinum and palladium also declined. The Bloomberg Dollar Spot Index, a gauge of the US currency, remained steady after sliding 0.8% on Thursday.