Gold prices reversed course to fall sharply in Asian trade on Tuesday as persistent strength in oil and hawkish comments from the Bank of Japan kept markets on edge over the inflationary impact of the Iran war.
Spot gold fell 1% to $4,633.29 an ounce, while gold futures fell 1% to $4,646.90/oz by 02:32 ET (06:32 GMT).
Other precious metals also tumbled. Spot silver fell 3.2% to $75.1425/oz, while spot platinum fell 1.3% to $1,961.71/oz.
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BOJ keeps rates steady but waxes hawkish; Fed in focus Losses in gold came after the Bank of Japan kept interest rates steady, but struck a largely hawkish tone on the inflationary impact of the Iran war.
The central bank sharply hiked its consumer price index inflation forecast for fiscal 2026, and warned that it will likely raise interest rates higher in response to increasingly sticky inflation.
The BOJ cited higher oil and fuel prices as a key driver of this inflationary trend.
The BOJ’s comments come just a day before the conclusion of a two-day Federal Reserve meeting.
While the Fed is also set to leave rates unchanged on Wednesday, the BOJ’s comments sparked some fears that the U.S. central bank will also present a hawkish outlook on inflation and rates.
Inflation readings for March, released earlier in the month, did show a sharp pick-up in price pressures.
The dollar firmed slightly in Asian trade and was sitting on strong gains from last week.
The Fed’s meeting is likely to be the last under current Chair Jerome Powell, whose term ends on May 15.
Powell is set to be replaced by former Fed governor Kevin Warsh, who testified before Congress in a confirmation hearing last week.
US-Iran deadlock remains; Washington balks at Iran proposal to reopen Hormuz Reports pointed to little progress in U.S.-Iran relations, as the two sides remained in deadlock over the Strait of Hormuz and Tehran’s nuclear ambitions.
Iran was seen offering a new proposal to reopen the Strait of Hormuz earlier this week. But reports on Monday showed Washington largely skeptical towards the proposal, given that it entails postponing talks on Tehran’s nuclear activities.
Attempts at direct U.S.-Iran negotiations fell flat over the weekend, as both parties declined to meet in Pakistan for more dialogue. The status of future talks remained largely unclear.
The inflationary impact of the Iran war-- as oil prices rose to near 2022 peaks-- has been a key point of pressure on gold, largely overshadowing bullion’s safe haven appeal as markets fretted over higher interest rates in major economies. High rates tend to dull the allure of non-yielding assets such as gold.
