Teaser: Gold jumped to the highest in almost a month after Iran declared the Strait of Hormuz “completely open” on Friday to commercial traffic, a major step toward ending the conflict that spurred energy prices to rally and threatened economic growth. As the dollar and Treasury yields declined, bullion gained up to 2.1% before losing some of its gains. Since the precious metal is valued in US dollars and pays no interest, a declining US dollar and reduced interest rates are advantageous. Traffic across the strait, a crucial waterway for energy shipments, has now been effectively disrupted again by the Middle East conflict, raising concerns that rising natural gas and oil prices would fuel widespread inflation and force central banks to postpone interest rate reduction or perhaps increase borrowing costs. For non-yielding commodities like gold, that would be detrimental. In recent days, however, as truce confidence fluctuated, bullion has recovered some of the war losses but volatility still persists due to the increasingly volatile nature of the US Iran negotiations where outlooks change on the daily.
Introduction:
Gold and silver traded through a volatile stretch, initially pressured as the Strait of Hormuz blockade and failed negotiations lifted energy prices, intensifying inflation concerns and delaying expectations of monetary easing across global markets. Due to global pressure and poor investment positioning, gold declined toward $4,700 and silver dropped below $75. Later, as truce advances and fresh diplomatic signals weighed on the dollar and drove down crude, sentiment changed and concerns about inflation subsided. Gold was getting close to $4,850 as a result, while silver was rising past $80. However, positive negotiations turned negative after seizure of an Iranian ship by the US Navy soured the prevailing sentiment at the end of last week, leaving both metals below pre-conflict levels and pointing to renewed instability.
Crude oil remained the key driver, swinging sharply as markets balanced supply risks against easing expectations and shifting geopolitical developments across the Middle East region. Fears of a blockade and a decline in OPEC+ supply caused prices to soar to $98–100 before falling below $92 as hopes for new negotiations and the reopening of the Strait boosted sentiment. Midweek, conflicting signals regarding troop movements and negotiations kept prices supported by a significant inventory decrease. However, positive negotiations turned negative after seizure of an Iranian ship by the US Navy soured the prevailing sentiment at the end of last week, reversing the earlier decline and reinforcing volatility as the risk premium began to rebuild.
Gold:
Gold dropped more than 1% to below $4,800 an ounce on Monday, giving back gains from the previous week as renewed hostilities in the Strait of Hormuz drove oil prices sharply higher, intensifying inflation concerns. In the latest escalation, President Donald Trump said the US Navy fired on and seized an Iranian-flagged cargo vessel in the Gulf of Oman after it ignored warnings to halt while departing Hormuz. Tehran also targeted ships and reasserted control over the Strait, arguing that the US blockade on Iran-linked vessels breached the ceasefire agreement. Meanwhile, Trump indicated there was still an opportunity for a deal ahead of another round of talks in Pakistan, although Iran sees little prospect for an agreement. The prolonged conflict has sparked a historic energy supply shock, heightening inflation risks and raising the likelihood of further central bank rate hikes, which weighed on gold. The precious metal remains down nearly 10% since the onset of the war.
Technical View: $4796. Momentum and oscillators appear neutral. Depressed trend indicators suggest limited strength, likely capping gains near the channel resistance at 4970. A sustained move above this level however, improves the scope for an extension toward the weekly supertrend at 5075 and higher targets at 5190/5230. Supports are established at 4755 and 4635, while an unexpected dip below 4460 would invalidate the recovery.
Silver
Silver dropped nearly 2% toward $79 an ounce on Monday, trimming gains from the previous week as renewed hostilities in the Strait of Hormuz drove oil prices sharply higher, intensifying inflation concerns. In the latest escalation, President Donald Trump said the US Navy fired on and seized an Iranian-flagged cargo vessel in the Gulf of Oman after it ignored warnings to halt while departing Hormuz. Tehran also targeted ships and reasserted control over the Strait, arguing that the US blockade on Iran-linked vessels breached the ceasefire agreement. Meanwhile, Trump indicated there was still an opportunity for a deal ahead of another round of talks in Pakistan, although Iran sees little prospect for an agreement. The prolonged conflict has sparked a historic energy supply shock, heightening inflation risks and raising the likelihood of further central bank rate hikes, which weighed on precious metals. The white metal remains down about 15% since the war began.
Technical View: $79.95. Weekly charts indicate trendline support levels seen at $77/76 Where dips could likely hold for a rise to $89/90. Above 92 we could see renewed bullish momentum towards $96.50 if momentum sustains. Only an unexpected cross below $75.5 can negate our bullish outlook and turn the picture negative.
Crude Oil
WTI crude futures surged nearly 8% to above $90 per barrel on Monday, reversing losses from the previous session as geopolitical tensions flared again in the Middle East. The rally followed remarks from President Donald Trump that the US Navy fired on and seized an Iranian-flagged cargo vessel in the Gulf of Oman after it ignored orders to stop while exiting Hormuz. Tehran also targeted ships and reasserted control over the Strait of Hormuz, arguing that the US blockade on Iran-linked vessels violated the ceasefire agreement. While momentum toward a lasting peace had been building late last week, uncertainty has since resurfaced, even as Trump said US negotiators would head to Pakistan on Monday for another round of talks. The prolonged conflict has triggered a historic energy supply shock, heightening inflation risks and raising concerns over a potential global economic slowdown.
Technical View: $87.37. Weekly chart shows price testing the critical supertrend support at 75.95; a sustained breach can expose the price to 68.75. Daily structure suggests a limited decline towards 79.60, with a fall below 77.60 needed to extend the downside. Resistances are at 91.85 and 97.00; a rise above 98.90 turns the outlook positive, while only a move above 101.20 can restore a bullish trend towards 105.95.
Copper
Copper futures in the US rose to above $6.1 per pound, the highest in over two months and tracking the increase in most industrial metals as signals of restored trade through the Strait of Hormuz improved the outlook of manufacturing activity and pressured the dollar. Iranian authorities stated that commercial vessels crossing the Strait of Hormuz will no longer be targeted, backing hopes of restored fuel supply from the region and improving operation costs for major manufacturers, which supports demand for industrial metals. In the meantime, the softer pivot to safety drove the US dollar to depreciate, supporting bidding for foreign consumers. Physical demand had already been supported by China as firms enter their restocking season. Longer-term demand was also supported by growing investment in electrification investments in grids, data centers, and electric cars.
Technical View: $6.07. Gains could likely cap at 6.17 for a fall towards 5.80/70 near term or even lower to 5.45/30 trendline supports if momentum persists. Favoured view is neutral with a bearish bias near term. Only an unexpected rise above 6.20 could change the outlook to bullish again.