Gold prices edged higher on Tuesday, while the dollar weakened, with investors keeping a wary eye on U.S. President Donald Trump’s impending deadline to Iran to unblock the Strait of Hormuz.
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Spot gold inched up by 0.8% to $4,685.54 per ounce by 05:04 ET (09:04 GMT), while gold futures for June delivery ticked up by 0.6% to $4,710.84 per ounce.
Trump vowed to decimate "every bridge" and "power plant" in Iran should the Islamic Republic not agree by his Tuesday 8 p.m. ET deadline to a deal which would reopen the Strait of Hormuz -- whose effective closure to tanker traffic has pushed up oil prices, threatening to drive inflation higher and weigh on global growth. Roughly one-fifth of the world’s oil squeezes through the waterway off of Iran’s southern coast.
Iran, for its part, has called for a permanent settlement that includes sanctions relief, security guarantees, and compensation for damages, although media reports suggested that the White House was not likely to accept the demands.
If the fresh U.S. attacks happen, Trump warned, it would take Iran "100 years to rebuild."
But the bellicose language was accompanied a caveat from Trump that a diplomatic resolution could be reached to the war, which began with joint U.S. and Israeli strikes on Iran in late February.
Also aiding sentiment around gold was China’s central bank, which maintained its purchases of the metal for a seventeenth straight month. Its reserves stood at 74.38 million fine troy ounces by the end of March, compared to 74.22 million in the prior month.
Gold remains lower over past month The yellow metal has slumped over the past one-month period, as the prospect of an energy-fueled inflation spike underpinned expectations that central banks around the world may opt to leave interest rates higher for longer. Non-yielding bullion tends to underperform in elevated rate environments.
Adding to the downward pressure on gold has been the U.S. dollar. The greenback has strengthened as investors rush to it as a safe haven, making dollar-denominated gold more expensive for overseas buyers.
On Tuesday, the dollar index, which tracks the currency against a basket of its peers, had dipped by 0.2%.
But the dollar remains higher by around 0.8% over the past month. During that time, spot gold has dropped by more than 8%.
