Key Points:
- Spot gold prices increased by 0.7 percent to $4,555.99 an ounce after dropping to a one-month low.
- The United States confirmed that a ceasefire with Iran is still active despite recent attacks in the Middle East.
- President Donald Trump launched Project Freedom to escort commercial ships through the Strait of Hormuz safely.
- High oil prices continue to fuel inflation fears, keeping gold prices down more than 10 percent since February.
Gold prices ticked upward on Tuesday. Spot gold rose 0.7 percent to reach $4,555.99 an ounce. Gold futures also gained 0.7 percent, settling at $4,566.11 an ounce. This small bounce happened right after the yellow metal hit a one-month low. During the previous trading session, gold fell more than 2 percent, reaching its lowest price since late March. The market finally calmed down after the United States government announced its ceasefire with Iran remains active despite a chaotic weekend.
The drama started over the weekend when President Donald Trump announced a new military operation called Project Freedom. Trump wants to reopen commercial shipping lanes in the Strait of Hormuz. Iran has effectively closed this vital waterway since the war began in late February. This closure caused the largest oil supply disruption in world history, as the strait handles one-fifth of the world’s crude oil.
Iran reacted aggressively to the new American operation. Iranian forces fired missiles at United States destroyers moving near the Strait. Iran even claimed a direct hit on an American warship. The United States Central Command quickly denied this claim. Military officials stated that no ships took any damage. Instead, they confirmed two American merchant ships successfully traveled through the dangerous waterway.
The violence spilled over into neighboring countries. The United Arab Emirates reported that an Iranian drone and missile attack started a major fire inside its borders. The strike hit a massive oil trading and storage hub located in the emirate of Fujairah. This attack added to the panic in global energy markets.
On Tuesday, American officials stepped in to cool the rising tension. United States Secretary of War Pete Hegseth spoke to reporters and clarified the goals of Project Freedom. He stated the mission is strictly defensive, highly focused, and temporary. The sole goal is to protect innocent commercial ships from unprovoked attacks.
Hegseth explained that American forces do not need to enter Iranian waters or airspace to carry out their duties. He insisted the military is not looking to start a new fight. He also delivered important news for the financial markets, confirming the current ceasefire with Iran is not over. He assured the public that commercial ships now have a safe lane to float through the strait.
Leaders in Tehran also offered some calm words to balance their missile strikes. Iranian Foreign Minister Abbas Araghchi warned that military force will never resolve the crisis in the Strait of Hormuz. However, he also shared some positive news. Araghchi mentioned that ongoing peace talks hosted in Pakistan are making real headway.
The brief burst of fighting over the weekend caused a sudden spike in oil prices due to fears of prolonged instability. But on Tuesday, Brent crude futures dropped as the calming words from Washington and Tehran hit the news wires. Even with this small drop, global oil prices remain much higher than they did before the war began.
Analysts at the banking firm ING sent a note to their clients explaining how this impacts precious metals. They pointed out that high energy costs directly fuel inflation. High inflation means central banks will likely keep interest rates higher for much longer than originally expected. This specific economic setup hurts assets like gold that pay no interest or dividends.
Right now, traders care much more about rising Treasury yields than the lingering threat of bombs and missiles. Because of this focus on interest rates, gold struggles to build any real momentum. Prices for the yellow metal have actually fallen more than 10 percent since the conflict started in late February. A strong American dollar makes gold even more expensive for foreign buyers, pushing demand down.
While gold tries to recover, other precious metals showed mixed results on Tuesday. Spot silver prices barely moved, inching up just 0.1 percent to $72.8050 an ounce. Platinum performed a bit better, climbing 1.2 percent to settle at $1,985.20 an ounce.
