COMEX gold was trading at $4,083.10 an ounce, down $30.60 or 0.74%, while COMEX silver fell $1.12, or 1.86%, to $59.045 an ounce during Asian trading.
The decline came even as geopolitical tensions intensified after Iran announced the closure of the Strait of Hormuz, a key global oil shipping route. The development pushed Brent crude above $78 a barrel, raising concerns that higher energy prices could fuel inflation and keep interest rates elevated for longer.
Why are gold and silver falling despite geopolitical tensions?
Gold is traditionally considered a safe-haven asset during periods of uncertainty. However, the precious metal also competes with interest-bearing assets.
The jump in crude oil prices lifted US Treasury yields and strengthened the US dollar as investors reassessed the outlook for Federal Reserve interest rates. A stronger dollar makes gold more expensive for buyers using other currencies, while higher bond yields increase the opportunity cost of holding non-interest-bearing assets such as gold.
As a result, the negative impact of higher yields and a firmer dollar outweighed safe-haven demand in early trade.
Silver, which has both precious and industrial metal characteristics, came under sharper pressure, falling almost 2%.
Inflation data and central bank outlook in focus
Investors are now awaiting a series of inflation readings, including US consumer price data, for clues on the Federal Reserve’s next policy move.
Market participants will also monitor US retail sales, housing data and weekly jobless claims later this week. Any signs of persistent inflation could reinforce expectations that interest rates will remain higher for longer, a factor that typically weighs on bullion prices.
Geopolitical developments remain a key trigger
Analysts expect gold and silver to remain volatile as markets track developments in the US-Iran conflict.
Any further escalation that pushes crude oil prices higher could intensify inflation concerns and support the US dollar and Treasury yields. Conversely, heightened geopolitical uncertainty could revive safe-haven demand for bullion if investors shift away from riskier assets.
For now, precious metals are caught between two opposing forces: geopolitical risks that support safe-haven buying and macroeconomic factors, particularly higher yields and a stronger dollar, that continue to pressure prices.
-With Reuters inputs
