Gold extended its decline as investors weighed conflicting signals regarding the Middle East situation. A delayed U.S. strike on Iranian energy infrastructure provided only brief respite for the precious metal, which has experienced sharp declines amid wartime volatility. During highly turbulent trading, gold fell as much as 1.8% after earlier gaining nearly 1%, moving largely in sync with stock markets and inversely with oil prices. U.S. President Donald Trump announced a five-day delay to his threatened strike on Iranian power plants, citing "productive discussions" on Monday. However, an Iranian official ruled out negotiations, while U.S. allies in the Gulf region were reportedly considering joining the conflict. Rising energy prices from the conflict have increased inflation risks, prompting investors to sell relatively liquid and profitable gold positions in favor of other assets. Gold fell nearly 2% in the previous session, marking its ninth consecutive decline. A tenth straight drop would set a record for the longest losing streak in history. Despite Trump's delayed strike announcement, uncertainty remains regarding negotiation outcomes and future shipping through the Strait of Hormuz. Even damage to existing energy infrastructure would require significant repair time, meaning inflation threats persist. Market expectations for interest rate hikes by the Federal Reserve and other central banks haven't diminished, creating additional headwinds for the non-yielding precious metal. "The relative weakness shown in gold's current pullback is more severe than usual," said Suki Cooper, head of commodities research at Standard Chartered. She added that "it's not uncommon for gold to face four to six weeks of downward pressure after extreme panic periods, as it proves to be a liquid asset when markets need it." A similar pattern occurred after the Russia-Ukraine conflict in early 2022, when safe-haven gold initially surged before declining for months as energy price shocks rippled through markets and intensified inflation pressures. "In major crises like this, investors often liquidate previously overweight positions in well-performing assets like gold to meet margin calls for underperforming assets such as stocks and bonds," said Peter Kinsella, global head of FX strategy at Union Bancaire Privee UBP SA. He noted gold displayed similar behavior during both the 2022 period and the 2008 global financial crisis. "Short-term price movements are primarily position-driven," he stated, while adding that long-term drivers remain unchanged. Although gold has fallen nearly 17% from the conflict's late February outbreak through Monday's close, it had previously enjoyed a sustained rally supported by geopolitical and trade tensions plus ongoing central bank purchases. Some persistent gold buyers are energy importers, meaning rising oil and gas import bills from the war reduce dollar reserves available for gold purchases. At press time, spot gold fell 1.07% to $4,359.80 per ounce. Silver declined 2.4% to $67.49, while platinum and palladium also traded lower. The Bloomberg Dollar Spot Index rose 0.24% after falling 0.4% in the previous session.
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