Gold prices declined at the start of the week as the U.S. dollar regained momentum, reducing demand for the precious metal despite lingering geopolitical tensions. Spot gold traded near $4,037 as traders weighed stronger U.S. economic data against uncertainty surrounding the Federal Reserve’s policy path.
The dollar recovered from recent multi-week lows after reported intervention by U.S. and Japanese authorities helped strengthen the Japanese yen. At the same time, developments in the Middle East continue to remain in focus.
President Donald Trump stated that the situation involving Iran was working out very well, although he accused Tehran of sending mixed signals by privately seeking negotiations while publicly denying talks. He also confirmed that the U.S. naval blockade would remain until Iran agreed to permanently abandon its nuclear ambitions and guarantee free passage through the Strait of Hormuz.
Economic data also influenced market sentiment. The Institute for Supply Management reported that U.S. manufacturing activity accelerated sharply last month, with the PMI rising to 55.6, well above expectations of 54.
Employment within the manufacturing sector expanded for the first time since 2023, reflecting stronger hiring demand. However, elevated input costs suggested inflationary pressures have not fully eased. The report also pointed to improved business confidence, greater clarity on tariffs, and easing supply-chain disruptions linked to the Gulf conflict.
Lower oil prices prompted investors to scale back expectations for a more aggressive Federal Reserve, with markets now pricing in only modest policy tightening through the end of 2026. Even so, uncertainty surrounding the U.S.-Iran conflict continues to cloud the outlook.
Any renewed surge in energy prices could reignite inflation concerns and push the Fed toward a more hawkish stance. At its recently ended policy meeting, some Fed officials favored a 25-basis-point rate increase, arguing that delaying further tightening risked keeping inflation above the central bank’s 2% target.
More recently, John Williams, the President of the New York Fed, reiterated that policymakers remain prepared to raise interest rates if inflation fails to moderate.
From a technical standpoint, gold is moving within a narrow range after falling below the $4,100 level last week. Momentum remains weak, with buyers showing little strength and sellers still holding the upper hand.
Overall, this precious metal’s near-term direction will likely depend on upcoming U.S. economic data, Federal Reserve expectations, and developments in the Middle East. Until a clear catalyst emerges, prices may continue to trade within their current range, with downside risks still slightly outweighing the upside potential.
As things stand, gold producers like Platinum Group Metals Ltd. (NYSE American: PLG) (TSX: PTM) may be glad that the price of bullion hasn’t fallen a lot further despite the combination of headwinds it has been facing.
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