Gold edged higher on Monday, supported by a weaker U.S. dollar and bargain hunting after a sharp recent selloff. However, the metal’s recovery remained limited as rising government bond yields and elevated crude oil prices continued to weigh on sentiment, with the conflict in Iran fueling inflation concerns and expectations of tighter monetary policy.
Spot gold was up 0.2% at $4,548.14 per ounce by early afternoon in New York, after earlier falling to a seven-week low of $4,481 per ounce, its weakest level since March 30. U.S. gold futures for June delivery settled 0.1% lower at $4,558. In early U.S. trading, spot gold was also seen near $4,552.80, up 0.30% on the session. Silver also recovered alongside gold. Spot silver rose 1.23% to $76.770 an ounce after rebounding from an eight-session low below $74.
Monday’s gains followed a bruising period for bullion. Gold had just recorded one of its steepest weekly losses outside the sharp mid-March drop, while silver had also fallen to multi-session lows. Prices found support as investors stepped in to buy after the decline, while broader market sentiment improved slightly when crude oil retreated from its latest spike. That easing in oil came after renewed hopes for a U.S.-Iran agreement that could help reopen the Strait of Hormuz more fully to oil tanker traffic. According to Tehran media, Washington has offered to pause sanctions on Iranian oil exports during peace talks currently being mediated by Pakistan. That news helped reduce some immediate supply fears in the energy market and contributed to a rebound in gold, silver, equities and bond prices.
Despite some optimism around diplomacy, the Strait of Hormuz remained the dominant cross-asset risk on Monday. Iran’s top security body announced the creation of a new Persian Gulf Strait Authority to oversee Hormuz operations. At the same time, Tehran continued to pursue greater control and fees over traffic through the critical waterway.
The U.S.-Iran peace track also appeared fragile. Reuters cited a Pakistani official as saying the two sides “don’t have much time” to reach an agreement over Tehran’s nuclear program. At the same time, U.S. President Donald Trump sharpened his rhetoric after speaking with Israeli Prime Minister Benjamin Netanyahu on Sunday, saying of Iran: “They better get moving, FAST, or there won’t be anything left of them.”Iran’s semi-official Fars news agency also reported that Tehran has launched Bitcoin-backed insurance for ships passing through the Strait of Hormuz, another sign of how seriously the country is treating the risk to shipping in the region.
Even though crude pulled back from intraday highs, oil remained elevated enough to keep inflation concerns front and center for investors.
Brent crude traded near $110.05 a barrel, while U.S. West Texas Intermediate was around $101.77, after earlier rising as high as $112 and $104, respectively. Those levels are high enough to reinforce fears that energy costs could feed through into broader inflation, complicating the outlook for central banks.
That dynamic has prevented gold from behaving like a straightforward safe-haven asset. Instead of geopolitical stress creating an unambiguous rally in bullion, stronger oil prices have pushed inflation expectations higher, lifted bond yields and increased the possibility of more restrictive monetary policy. Those forces reduce the appeal of non-yielding assets like gold.
The biggest headwind for gold remains the sharp rise in global borrowing costs. Although bond prices rebounded somewhat on Monday, yields remained near historically elevated levels. U.S. 30-year Treasury yields hovered around 5%, while Japan’s 30-year government bond yield remained near 4%, the highest since the bond’s debut in 1999. In the UK, comparable gilt yields were close to 6%.
This bond market selloff has become a major issue for policymakers. G7 finance chiefs meeting in Paris this week are expected to discuss the rise in global yields and the broader stress in sovereign debt markets, driven by persistent inflation, heavy debt issuance and growing concern over fiscal sustainability.
In its April report, the International Monetary Fund said the increase in U.S. Treasury issuance is reducing the traditional safety premium of Treasuries and contributing to higher borrowing costs globally. Earlier this month, JPMorgan CEO Jamie Dimon also warned that credit markets could be heading toward a bond crisis.
While high yields are a short-term drag on gold, the broader fiscal picture continues to support the metal over the longer term. The U.S. Treasury Department expects to borrow $189 billion in the April-June quarter, which is $79 billion more than it projected in February. At the same time, the U.S. government is now spending more than $1 trillion annually on interest alone, while federal budget deficits are still running near $2 trillion annually, according to Congressional Budget Office projections. These trends have reinforced concerns about debt sustainability and the long-term value of fiat currencies, helping maintain strategic support for gold even during periods of short-term volatility.
Analysts said gold remains caught between supportive structural drivers and near-term macro pressure. “Gold’s bullish backdrop remains supported by geopolitical risks, mounting fiscal deficits and ongoing monetary-policy uncertainty,” said James Steel, analyst at HSBC. However, he cautioned that gold could face short-term volatility and liquidation pressure as investors raise cash during broader market stress linked to the Iran conflict. “Gold acted like an insurance policy [in March] and investors cashed in part of that policy when they needed liquidity,” he said.
Simon-Peter Massabni, Head of Business Development at XS.com, said gold was holding just above an important psychological threshold. “Gold prices are holding steady just above $4,500 per ounce, close to the lowest level recorded so far this May,” Massabni said. “Gold could face further downward pressure in the coming days as the market braces for more escalation in the Middle East.”
Broader financial markets showed some signs of stabilization on Monday. Western stock markets reversed early losses, while gold, silver and government bonds all recovered from session lows. Still, investors now face an important week for U.S. macro signals. Monday’s economic calendar includes the May NAHB housing market index and March net long-term TIC flows. Still, the key event will be Wednesday’s release of the Federal Reserve’s April meeting minutes. Traders will be looking for any sign that Fed officials are becoming more concerned about inflation risks in the wake of the latest oil shock. Fed funds futures are already pricing in a meaningful chance of a rate hike by year-end, marking a sharp shift from the earlier rate-cut expectations that had supported gold earlier in the year.
For now, gold remains trapped between two powerful forces. On one side, geopolitical risk, fiscal deficits and bond market instability continue to provide underlying support. On the other hand, elevated oil prices, rising yields and the growing possibility of tighter monetary policy are capping any stronger advance. Monday’s price action clearly reflected that balance: gold managed to recover from recent lows, but the rebound remained cautious and fragile. Until there is greater clarity on the situation in Iran, oil prices and the Federal Reserve’s next steps, the gold market is likely to remain volatile.