Gold Rebounds Sharply After Selloff, Boosted by Signals of US-Iran Negotiations
Gold prices rebounded sharply after a major selloff, supported by news that the United States had signaled an openness to negotiations with Iran. This recovery occurred as the market responded to a shift in the geopolitical narrative that had previously pressured gold to lose its entire yearly gain.
Gold pared significant losses on Monday after US President Donald Trump postponed for five days a planned attack on Iran's energy infrastructure, citing "productive" talks aimed at ending hostilities. However, Iran denied any discussions, leaving the market assessing the fragile situation and relying heavily on headlines.
In recent trading, spot gold was trading around $4,423 per ounce. Previously, gold had fallen below $4,200 per ounce, erasing its year-to-date performance and recording one of the sharpest short-term declines in decades.
The sharp decline was triggered by a shift in market expectations toward higher interest rates amid surging energy prices, coupled with a strengthening US dollar and weakening physical demand from the Middle East due to supply disruptions. Pressure was also exacerbated by profit-taking from institutional and sovereign investors who reduced exposure after the previous rally.
The subsequent rebound underscored gold's sensitivity to shifts in the geopolitical narrative. According to UBS, before news of the negotiations emerged, the market had already "shifted decisively" toward expectations of monetary policy tightening, temporarily sidelining long-term themes such as dedollarization and fiscal risk. UBS strategists led by Wayne Gordon considered gold's reaction "unintuitive" for some investors—given that geopolitical conflicts are typically synonymous with safe havens.
However, UBS cautioned that history shows gold "does not always rise during conflicts," especially in the early stages. In many cases, macro factors—particularly the direction of interest rates and currency movements—are more dominant in shaping gold prices than geopolitical sentiment alone.
Newsmaker's bottom line: Today's gold recovery reflects more of a shift in risk perception than a permanent fundamental shift. As long as the market continues to price in a scenario of prolonged high interest rates due to the oil shock, gold will remain volatile—and its future direction will depend heavily on a combination of developments in Iran and the dynamics of the dollar and yields.
Source: Newsmaker.id
