Gold prices fell nearly 1.5% in the European market on Monday, pulling back from two-week highs under pressure from rising US dollar and oil prices in global markets, as peace talks between the United States and Iran stalled after Trump rejected Iran’s response to the US peace proposal.

Higher oil prices are renewing inflationary pressure on Federal Reserve policymakers and reducing the likelihood of near-term US interest rate cuts, as markets await further data on developments in the world’s largest economy.

Price Overview

•  Gold prices today: Gold prices declined by around 1.5% to $4,648.30, from the opening level at $4,715.03, while recording a session high at $4,715.03.

•  At Friday’s settlement, gold prices gained 0.65%, resuming gains that had paused in the previous session due to correction and profit-taking from the two-week high at $4,764.85 per ounce.

•  Gold prices rose 2.2% last week, marking the first weekly gain in the past three weeks, supported by hopes for a lasting peace agreement between the United States and Iran.

US Dollar

The dollar index rose more than 0.3% on Monday, resuming gains that paused on Friday and reflecting stronger performance of the US currency against a basket of major and secondary currencies.

As is known, a stronger US dollar makes dollar-denominated gold bullion less attractive for holders of other currencies.

The dollar’s rise comes amid renewed safe-haven demand due to fears of escalating military confrontation between the United States and Iran, especially after Tehran rejected the US peace proposal.

Stalled US-Iran Talks

On the Truth Social platform, US President Donald Trump announced his complete rejection of the Iranian response delivered through the Pakistani mediator, saying: “I just read the response from the so-called representatives of Iran… I don’t like it at all. Completely unacceptable.”

The Iranian proposal included ending the war on all fronts, including Lebanon, lifting the US naval blockade on Iranian ports, allowing Iranian control over the Strait of Hormuz, and obtaining war reparations, in exchange for later negotiations over the nuclear الملف.

Iranian President Masoud Pezeshkian struck a defiant tone, saying Iran “will not bow its head to the enemy,” and that entering negotiations does not mean surrendering to “Trump’s greed.”

Israeli Prime Minister Benjamin Netanyahu also said in a television interview that the war is still ongoing because “there is more work to finish.”

Global Oil Prices

Global oil prices jumped more than 5% on Monday at the start of the week, heading toward the highest levels in several weeks amid fears over continued closure of the Strait of Hormuz and disruptions to oil supplies.

There is little doubt that higher global oil prices are reviving concerns about accelerating inflation, which could push central banks worldwide toward raising interest rates in the near term, marking a sharp shift from pre-war expectations of prolonged rate cuts or stable policy rates.

US Interest Rates

•  According to the Federal Reserve’s semiannual report released Friday, the ongoing war with Iran and its impact on oil prices and supplies topped the list of financial stability concerns.

•  According to the CME FedWatch tool: markets currently price a 95% probability that US interest rates will remain unchanged at the June meeting, while the probability of a 25 basis point rate cut stands at 5%.

•  To reassess those expectations, investors are closely monitoring further US economic data releases, in addition to comments from Federal Reserve officials.

Gold Outlook

KCM Trade chief market analyst Tim Waterer said: “We are currently seeing hopes for a near-term peace agreement fading, while gold is being negatively affected by the renewed rise in crude oil prices.”

Waterer added: “In the short to medium term, the $4,400 to $4,800 per ounce range remains strongly in play as long as we remain stuck in this ceasefire-without-peace-agreement environment.”

SPDR Fund

Holdings of SPDR Gold Trust, the world’s largest gold-backed ETF, increased on Friday by 0.51 metric tons, marking the second consecutive daily increase and lifting total holdings to 1,033.99 metric tons.

The euro declined in the European market on Monday against a basket of global currencies, moving away from its three-week highs against the US dollar as investors focused on buying the US currency as the best alternative investment amid stalled negotiations between the United States and Iran and the possibility of renewed military confrontations in the Middle East.

After global oil prices rose, pricing for the probability of a European interest rate hike in June also increased. To reprice those expectations, traders are awaiting the release of more economic data from the eurozone.

Price Overview

Euro exchange rate today: The euro fell against the dollar by 0.35% to $1.1745, from Friday’s closing level of $1.1784, and recorded a session high of $1.1772.

The euro ended Friday’s trading up by 0.5% against the dollar, resuming gains that had paused the previous day amid correction and profit-taking operations from the three-week high of $1.1797.

The euro also posted a weekly gain of 0.55% against the dollar last week, marking its second consecutive weekly gain, supported by hopes of reaching a lasting peace agreement between the United States and Iran.

The US dollar

The dollar index rose on Monday by about 0.3%, resuming gains that had paused on Friday and reflecting stronger levels of the US currency against a basket of global currencies.

This rise comes amid safe-haven buying of the US currency due to fears of renewed military confrontations between the United States and Iran, especially after Tehran rejected the US peace proposal.

Opinions and analysis

Chris Weston, head of research at Pepperstone Group in Melbourne, said: “We begin trading in the new week, as has recently become the norm, influenced by geopolitical events.”

Strategists at Barclays Bank said: “The dollar remained under pressure last week as markets focused heavily on the prospects of a gradual reopening of the Strait of Hormuz.”

US-Iran negotiations stall

On the “Truth Social” platform, US President Donald Trump announced his complete rejection of the Iranian response delivered through the Pakistani mediator, saying: “I just read the response from the so-called representatives of Iran… I do not like it… totally unacceptable.”

The Iranian proposal included ending the war on all fronts, including Lebanon, lifting the US naval blockade on Iranian ports, allowing Iranian administration of the Strait of Hormuz, and obtaining war reparations in exchange for later negotiations regarding the nuclear file.

Iranian President Masoud Pezeshkian struck a defiant tone, stressing that his country “will not bow its head to the enemy,” and that entering negotiations does not mean surrendering to “Trump’s greed.”

Israeli Prime Minister Benjamin Netanyahu said in a television interview that the war is still ongoing because there is “more work to do to finish it.”

Global oil prices

Global oil prices jumped by more than 5% on Monday at the start of weekly trading, heading toward their highest levels in several weeks amid fears that the Strait of Hormuz will remain closed and oil supplies disrupted.

There is no doubt that rising global oil prices are reviving concerns about accelerating inflation, which could push global central banks toward raising interest rates in the near term, marking a sharp shift from pre-war expectations of interest rate cuts or prolonged stability.

European interest rates

With global oil prices rising, money market pricing for the probability of the European Central Bank raising European interest rates by 25 basis points in June increased from 45% to 50%.

In order to reprice the above probabilities, investors are awaiting the release of more economic data from the eurozone regarding inflation, unemployment, and wage levels.

The Japanese yen declined in the Asian market on Monday against a basket of major and secondary currencies, moving further away from its three-month highs against the US dollar and trading in negative territory as investors focused on buying the US currency as the best alternative investment amid fears of a renewed Iranian war, especially after the United States rejected Iran’s response to the American peace proposal.

With global oil prices rising, concerns are resurfacing about mounting inflationary pressures on policymakers at the Bank of Japan, which could push them toward raising interest rates in the near term, pending the release of more data on developments in the world’s fourth-largest economy.

Price Overview

Japanese yen exchange rate today: The dollar rose against the yen by about 0.35% to ¥157.17, from the opening level of ¥156.65, and recorded a low of ¥156.52.

The yen ended Friday’s trading up by 0.15% against the dollar, resuming gains that had paused the previous day amid correction and profit-taking operations from the three-month high of ¥155.03.

The yen also posted a weekly gain of 0.25% against the dollar last week, marking its second consecutive weekly gain, supported by speculation about further intervention by Japanese monetary authorities in the currency market to support the local currency.

The US dollar

The dollar index rose on Monday by about 0.3%, resuming gains that had paused on Friday and reflecting stronger levels of the US currency against a basket of global currencies.

This rise comes amid safe-haven buying of the US currency due to fears of renewed military confrontations between the United States and Iran, especially after Tehran rejected the US peace proposal.

US-Iran negotiations stall

On the “Truth Social” platform, US President Donald Trump announced his complete rejection of the Iranian response delivered through the Pakistani mediator, saying: “I just read the response from the so-called representatives of Iran… I do not like it… totally unacceptable.”

The Iranian proposal included ending the war on all fronts, including Lebanon, lifting the US naval blockade on Iranian ports, allowing Iranian administration of the Strait of Hormuz, and obtaining war reparations in exchange for later negotiations regarding the nuclear file.

Iranian President Masoud Pezeshkian struck a defiant tone, stressing that his country “will not bow its head to the enemy,” and that entering negotiations does not mean surrendering to “Trump’s greed.”

Israeli Prime Minister Benjamin Netanyahu said in a television interview that the war is still ongoing because there is “more work to do to finish it.”

Global oil prices

Global oil prices jumped by more than 5% on Monday at the start of weekly trading, heading toward their highest levels in several weeks amid fears that the Strait of Hormuz will remain closed and oil supplies disrupted.

There is no doubt that rising global oil prices are reviving concerns about accelerating inflation, which could push global central banks toward raising interest rates in the near term, marking a sharp shift from pre-war expectations of interest rate cuts or prolonged stability.

Japanese interest rates

Following the rise in oil prices, pricing for the probability of the Bank of Japan raising interest rates by a quarter percentage point at the June meeting increased from 55% to 60%.

In order to reprice those probabilities, investors are awaiting the release of more data on inflation, unemployment, and wage levels in Japan.

The Canadian dollar weakened against all G10 currencies on Friday after domestic data showed an unexpected decline in employment, prompting investors to scale back bets on further interest rate hikes by the Bank of Canada this year.

The Canadian dollar, known as the “loonie,” fell 0.2% to 1.3690 against the US dollar, or 72.99 US cents, after touching its weakest level since April 29 at 1.3710 during the session. It was the only G10 currency to post losses against the US dollar.

On a weekly basis, the Canadian dollar declined 0.7% after four consecutive weeks of gains.

Data showed that the Canadian economy lost 17,700 jobs during April, while the unemployment rate rose to a six-month high of 6.9%, signaling continued weakness in the labor market amid pressure from trade uncertainty. Analysts had expected the economy to add 15,000 jobs.

Karl Schamotta, chief market strategist at Corpay, said in a note: “The Canadian dollar is weakening as traders reduce expectations for monetary policy tightening that had previously been priced into interest rate curves, while yield differentials continue to favor the US dollar.”

He added: “We believe signs of stabilization will emerge over the coming months as trade uncertainty eases and downside momentum in the housing market begins to slow, but today’s data points to a long and difficult road ahead for the Canadian economy.”

Investors reduced expectations for Bank of Canada monetary tightening to 38 basis points by December, down from 44 basis points before the data release.

The central bank had indicated last week that it might be forced to implement consecutive interest rate increases if elevated oil prices continue pushing inflation higher.

Meanwhile, US employment data showed continued strength in the labor market, reinforcing expectations that the Federal Reserve will keep interest rates unchanged for some time.

Oil prices rose 0.9% to $95.64 per barrel after renewed clashes near the Strait of Hormuz raised fresh questions about the ceasefire agreement between the United States and Iran. Oil is one of Canada’s key exports.

Canadian government bond yields also declined across the yield curve, with the 10-year bond yield falling 4.1 basis points to 3.483%.