Gold prices (XAU/USD) dipped toward $4,535 during Monday’s early Asian session, bringing an end to a two-day rally. The decline comes as progress in diplomatic negotiations between the US and Iran remains stalled, leaving traders closely monitoring ongoing Middle East tensions for potential market catalysts.
According to a Reuters report on Sunday, while Iranian officials maintain that discussions with the US are ongoing, no formal nuclear commitments have been established. Mohammad Bagher Ghalibaf, Iran’s parliament speaker and chief negotiator, emphasized that Tehran will reject any agreement with Washington that fails to guarantee the “rights of the Iranian people.”
Adding to the regional instability, Israel has expanded its ground operations in Lebanon, disrupting a fragile truce with its northern neighbor.
Simultaneously, Federal Reserve policymakers indicated on Friday that further interest rate hikes may be necessary if conflict in the Middle East triggers a sustained spike in inflation. Because gold is a non-yielding asset, its appeal typically diminishes in a high-interest-rate environment, even during periods of geopolitical volatility.
Market participants are now looking toward the US May employment data due this Friday for new direction. The report is expected to provide critical insights into whether the US economy’s strength will prompt the Fed to implement rate hikes heading into next year.