Gold prices declined on Monday, the first trading day of the week, as a stronger U.S. dollar and higher crude oil prices reduced demand for the precious metal. Investors also focused on developments surrounding a possible extension of the ceasefire between the United States and Iran.
The price of gold dropped by 0.4% and reached $4,518 per ounce. The decline came after gold recorded its highest level in two weeks last Friday. August gold futures also lost 1% and traded near $4,548 per ounce.
Market analysts said rising oil prices and uncertainty surrounding U.S.-Iran negotiations affected investor confidence. These factors limited gold’s gains at the beginning of the week and pushed prices lower.
U.S. President Donald Trump announced on Friday that he would soon decide on a proposal to extend the ceasefire agreement with Iran. However, major differences still separate both sides on several key issues. As a result, financial markets continue to watch the situation closely.
Meanwhile, tensions in the Middle East remain high. Israeli Prime Minister Benjamin Netanyahu ordered military forces to expand operations inside Lebanon against the Iran-backed Hezbollah group. He issued the order despite a ceasefire that started more than six weeks ago.
Oil prices gained more than 2% during Monday’s early trading session. The increase raised concerns about inflation and strengthened expectations that central banks may keep interest rates higher for longer. Higher interest rates usually reduce the appeal of gold because the metal does not provide interest income.
Investors often choose gold during periods of uncertainty because it offers protection against inflation and market volatility. However, higher borrowing costs encourage many investors to move their money into assets that generate returns.
Michelle Bowman, Vice Chair of the U.S. Federal Reserve, said officials continue to assess the economic impact of the Middle East conflict. She added that persistent inflation could force policymakers to maintain a stricter monetary policy.
Despite the recent decline, analysts remain positive about gold’s long-term outlook. Some experts expect gold prices to reach $5,500 per ounce before the end of 2026 if oil prices decline and the U.S. dollar loses strength.
