Gold Retreats as Dollar Strengthens Amid US‑Iran Tensions and Oil Gains Hold

Gold slipped on Monday, with London spot falling 0.6% to $4,684.32 an ounce and US June gold futures on Comex dropping 0.8% to $4,692.70. The decline follows a sharp uptick in the dollar as renewed US‑Iran friction pushed the currency higher and reignited worries that rising oil prices could keep inflation elevated.

Traditionally, Middle East flare‑ups lift demand for the precious metal as a safe‑haven, but the current stronger dollar has outweighed that effect. A firmer dollar makes gold more expensive for holders of other currencies, dampening demand outside the United States.

Gold’s sensitivity to interest‑rate expectations also played a role. As a non‑yielding asset, it tends to suffer when investors anticipate that the Federal Reserve will keep rates higher for longer. In such a backdrop, the dollar and Treasury yields often climb, tightening the environment for precious metals.

The market reaction came after President Donald Trump rejected Iran’s response to a US peace proposal, deepening a 10‑week standoff that has already rattled energy markets, disrupted shipping lanes and heightened concerns over supply through the Strait of Hormuz.

Oil prices rose on fears that the crisis could keep supplies tight, a scenario that feeds inflation expectations and could prompt central banks to maintain restrictive policy. Rather than boosting gold through safe‑haven buying, the immediate effect has been to strengthen the dollar and weigh on the metal.

Analysts see the tension between geopolitical support and macro‑economic headwinds as the key theme for gold in the near term. While haven demand may curb a sharper sell‑off, stronger oil and dollar moves could continue to cap rallies.

Investors are now eyeing upcoming U.S. consumer‑price data for clearer signals on inflation momentum and the Fed’s likely stance. A firmer‑than‑expected CPI print would reinforce a restrictive policy case and keep pressure on bullion; a softer reading could ease the dollar and give gold some room to rebound.

Broader supply and demand signals are also under scrutiny. China’s output, the world’s second‑largest gold producer, fell to 28 tonnes in Q1 2026 from 43 tonnes a year earlier, largely due to shutdowns for safety checks at several refining operations.

For now, gold remains under pressure as the market balances geopolitical risk against inflationary and monetary policy concerns.