Gold prices hit their highest in about three months on Monday, as a series of factors including a weaker dollar and growing geopolitical tension boost the commodity.
Spot gold was up 0.66 per cent at $4,646.52 per ounce, as of 11.20am UAE time, adding to gains of more than 5 per cent last week.
The dollar is at a multi-month low after the US announced last week that it would increase its bond buyback programme. A weaker US dollar makes gold more affordable for holders of other currencies.
"We see the current gold market being shaped by several forces at once rather than one isolated catalyst," said Naeem Aslam, chief investment officer at Zaye Capital Markets.
"[US President Donald] Trump’s warning that military intervention remains available, his comments on US control around the Strait of Hormuz, and the renewed breakdown in Canada trade negotiations all add to geopolitical and trade uncertainty," he said.
"Those developments matter because gold generally attracts stronger demand when investors face greater uncertainty around energy supply, tariffs, inflation, and the stability of global trade relationships."
White House Treasury Secretary Scott Bessent has said that the war in Iran is reaching the “end game", with the US set to unveil strong economic measures against Tehran on Monday.
“At dawn begins an economic D-Day — the single greatest financial offensive ever marshalled against an adversary," Mr Bessent said. “Our objective is to sever every economic lifeline that sustains the tyrannical regime until Tehran stands alone.”
He also warned that countries continuing to support Iran economically "would do well to consider the consequences of sustaining it”.
Gold has also benefited from softer monetary policy expectations over the short term, with markets betting that the Fed will maintain interest rates at its next meeting in September.
"The key gold-price question is whether safe-haven demand can continue outweighing the pressure from strong US growth and potentially higher real yields," Mr Aslam said.
"If geopolitical risk intensifies while the dollar and real yields soften, gold could remain well supported above the $4,600 area and retest recent highs. If trade tensions ease and strong services activity pushes yields higher, gold could consolidate without necessarily breaking its broader uptrend," he said.
Oil drops
Oil prices fell on Monday, after gaining over the past week, as markets awaited details about the US crackdown against Iran.
Brent, the benchmark for two-thirds of the world’s oil, had shed 1.41 per cent to reach $93.06 per barrel at 9.01am UAE time. West Texas Intermediate, the gauge that tracks US crude, was trading 1.65 per cent lower at $85.62 a barrel.
“Oil is retreating after two consecutive weeks of strong gains, with the move lower driven by a combination of profit-taking and geopolitical uncertainty around the US-Iran situation,” Noureldeen Al Hammoury, chief market strategist at Equiti Group, told The National.
“Mr Bessent is set to unveil details of a US economic isolation plan for Iran later today. Markets are in a wait-and-see mode ahead of the announcement, with uncertainty over scope and allied participation weighing on sentiment."
Meanwhile, Iran's Supreme National Security Council Secretary Mohsen Rezaei said Tehran could halt all oil exports through the Strait of Hormuz if the US proceeded with its plan, adding to oil market volatility.
Oil gained last week on supply concerns due to the war. Brent closed the week 6.6 per cent higher, while WTI rose 5.7 per cent.
The US-Iran war, which began on February 28, has roiled oil markets. Shipping across the Strait of Hormuz, a vital waterway for the transport of global crude, came to a virtual halt as Iran launched attacks on vessels crossing the channel.
Traffic fell from more than 100 vessels per day before the conflict to only single digits on some days, as shipowners exercised caution and avoided the channel as a safety measure.
Oil outlook
The trajectory of prices will depend on US measures, said Mr Al Hammoury. "A broad, allied-backed plan could tighten supply expectations and push prices higher," he said, while "a narrower or poorly received plan could extend today's pullback".
However, Iran's threat to block Arabian Gulf oil exports is a tail risk that markets are pricing cautiously. Any escalation at that end would be a sharp upside shock given the volume of crude that transits the strait, he added.
Investors will also be closely watching the Federal Reserve's annual symposium at Jackson Hole in Wyoming this week for forward guidance on interest rates that could affect oil markets and the dollar's trajectory.
