Gold edged lower Monday as hopes for a breakthrough in U.S.-Iran diplomacy remained elusive, underscoring how this year’s war has upended one of the market’s oldest assumptions: that geopolitical turmoil automatically lifts bullion.
Spot gold fell 0.7% to $4,679.09 an ounce in London, slipping below $4,700 after Axios reported that Iran had offered a new proposal to the U.S. centered on reopening the Strait of Hormuz while delaying nuclear negotiations. Front-month gold futures settled down 1% at $4,675 a troy ounce, according to FactSet. Silver also weakened, falling 1.8% to $75.003, while platinum and palladium posted steeper losses.
The decline came even as the conflict entered its second month and energy markets remained under severe strain. The Strait of Hormuz, a chokepoint for roughly one-fifth of global oil flows, is effectively shut, with blockades by both sides disrupting shipments. Oil prices rose again on Monday, reflecting the growing risk that the supply shock will feed inflation and keep central banks cautious.
That dynamic has become the key reason gold has failed to behave like a classic haven. Historically, investors flock to bullion when war breaks out and uncertainty rises. But this time, rising oil prices have pushed inflation expectations higher, increasing the likelihood that the Federal Reserve and other central banks will keep interest rates elevated for longer, or even tighten further. Because gold offers no yield, higher real rates make it less attractive relative to assets such as U.S. Treasuries, where the 10-year note now yields about 4.3%. As a result, gold has lost roughly 10% since the conflict began in late February, despite the worsening geopolitical backdrop. The move has confounded investors who had grown used to gold’s spectacular momentum. After surging 64% in 2025 and breaking through $5,000 an ounce for the first time in January 2026, bullion had become one of the market’s most crowded trades. Retail enthusiasm swelled, gold ETFs attracted broad attention, and many investors came to see the metal as an almost automatic hedge against instability.
Instead, that crowded positioning has left gold vulnerable. Bloomberg described gold’s weakness as one of the most unusual market moves of the Iran war, pointing to higher real yields, a firmer dollar, and stretched retail positioning as major drags. Although the Bloomberg Dollar Spot Index slipped 0.2% Monday, bullion still struggled to gain traction.
Analysts say the market is stuck between competing forces. On the one hand, war, blockades, and headlines of fragile ceasefires should support demand for havens. On the other hand, inflation risks, elevated yields, and uncertainty over diplomacy are capping any rally. “Unless we see a more durable reopening or a credible path toward a peace deal, any renewed upside in gold is likely to prove temporary, with prices continuing to trade in a range,” said Dilin Wu, a research strategist at Pepperstone Group Ltd.
That uncertainty deepened over the weekend when President Donald Trump abruptly canceled a planned trip by senior envoys Steve Witkoff and Jared Kushner to Pakistan, which has been mediating talks. Iranian President Masoud Pezeshkian responded by saying Tehran would not enter negotiations “under threats or blockade.” Nicky Shiels, head of research and metals strategy at MKS PAMP SA, described gold as being in “technical no-man’s-land.” “Conviction is thin, larger allocations remain sidelined, physical is mixed, and ‘lost’ is probably the most honest word for where the market is right now,” Shiels wrote. She added that repeated “ceasefire-on/ceasefire-off” headlines have conditioned traders to avoid chasing the metal lower, particularly with gold now acting less like a pure haven and more like a risk asset. In her view, there is little appetite to chase it below $5,000.
The result is a market caught in a feedback loop: every setback in talks lifts oil, every rise in oil worsens inflation concerns, and every inflation scare reduces the odds of lower rates, a combination that continues to weigh on precious metals.
Gold has now posted eight losing sessions in the last 12, while silver has fallen in four of the past six. For investors who spent the last two years treating bullion as an unstoppable trade, the lesson is becoming harder to ignore: sometimes the market everyone believes cannot lose is the one most likely to disappoint. For now, gold is no longer simply a refuge from fear. It is increasingly a referendum on inflation, interest rates, and whether this war can be contained before the economic damage spreads further.