Quick overview

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Gold fluctuated as attempts to restart peace negotiations between the US and Iran stalled and energy flows via the Strait of Hormuz remained restricted two months into a conflict that has rocked international markets and increased the risk of inflation.

Bullion increased as much as 0.4 percent to $4,730 an ounce after Axios revealed that Iran had presented the US with a fresh proposal to reopen the strait while delaying talks on the Islamic Republic’s nuclear program, reversing an earlier decline.

Tehran stated that it will not engage in negotiations as long as it is under threat, while US President Donald Trump canceled a trip by his top envoys to resume peace talks in Islamabad over the weekend.

In the meantime, traders are evaluating the Federal Reserve’s approach to borrowing costs following US Attorney Jeanine Pirro’s announcement on Friday that she is abandoning an investigation into cost overruns at the US central bank, paving the way for Trump nominee Kevin Warsh to take over as chair.

Investors anticipate that Warsh will take a measured approach, lowering rates gradually, rather than implementing the drastic rate cuts that the president has called for. Approximately one-fifth of global oil flows have been disrupted in the Middle East due to the effective closure of the Strait of Hormuz.

A precarious ceasefire was largely maintained over the weekend, but Trump instructed his envoys, Jared Kushner and Steve Witkoff, to forgo their trip to Pakistan, which is mediating the negotiations.

Iran will not engage in “imposed negotiations under threats or blockade,” according to Iranian President Masoud Pezeshkian. The market has been conditioned by the “ceasefire-on/ceasefire-off” headline roulette, according to Shiels. Given that gold is currently acting like a risky asset, there is a negative correlation.