Spot gold was down 0.9% at $4,796.56 an ounce in early trading, after hitting its highest since March 18 earlier in the session. U.S. gold futures for June delivery fell 0.6% to $4,820.50.
“Gold and silver are just seeing some mild and routine profit-taking after scaling overnight highs,” said Jim Wyckoff, senior analyst at Kitco Metals.
“Gold prices have been rallying on improved risk appetite and selling off during bouts of risk aversion in recent sessions, running counter to the metal’s traditional safe-haven role. Traders are currently more focused on the implications of tighter monetary policy and inflation pressures,” he added.
U.S. President Donald Trump said talks with Iran to end the war could soon resume and end in a deal, telling the world to watch out for an “amazing two days”, while U.S. forces imposing a blockade turned back vessels leaving Iranian ports.
Oil prices gained as shipping through the Strait of Hormuz remained constrained. Forty-five days after Iran’s Revolutionary Guards declared the strait closed, transit through the waterway remains uncertain despite a two-week ceasefire.
The Federal Reserve may need to wait until 2027 to cut interest rates if an extended bout of high oil prices from the Iran war delays inflation’s progress towards the U.S. central bank’s 2% goal, Chicago Fed President Austan Goolsbee said on Tuesday.
The market currently sees a 31% chance of a U.S. rate cut this year.
Higher interest rates tend to weigh on gold by increasing the opportunity cost of holding a non-yielding asset, offsetting the metal’s appeal as an inflation hedge.