(Bloomberg) — Gold extended a decline after Israel and Iran exchanged missile attacks, putting a fragile ceasefire at risk and dimming hopes for an end to the war that’s roiled global markets.
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Bullion fell as much as 1.4% to below $4,270 an ounce, before paring some losses. The metal gave up nearly 5% last week during the worst flare-up in regional hostilities since the truce was agreed in early April. Fighting escalated on Monday, with the Israel Defense Forces saying it hit military targets in western and central Iran after intercepting missiles fired by Tehran. Iran later launched a fresh wave of attacks.
The strikes came despite President Donald Trump’s call for Israel to refrain from escalation as the US leader pursues a negotiated solution to the conflict. A military adviser to Iran’s supreme leader said the country’s missile launch toward Israel on Sunday was a “warning” to cease attacks in Lebanon, a side-conflict that has been a sticking point in negotiations for a wider agreement between Washington and Tehran.
Now in its fourth month, the war has disrupted energy flows via the Strait of Hormuz, driven oil prices higher and raised concerns about global inflation, making central banks more likely to keep interest rates steady or raise them — a headwind for precious metals. On Monday, Yemen’s Iranian-backed Houthis also announced a blockade of Israeli ships in the Red Sea.
Key issues concerning the conflict in the Middle East remain “unresolved,” Rhona O’Connell, head of market analysis at StoneX Group Inc., said in a note. “Our belief in a downward bias is, so far, being vindicated, but we are keeping our eyes open for any bargain hunting.”
On Friday, bullion erased its year-to-date gain after robust US jobs data fueled bets that the Federal Reserve would raise borrowing costs in 2026. Bond yields and the US dollar climbed after jobs growth topped all forecasts in May, weighing on gold that’s priced in the US currency.
Traders were also assessing another around of gold purchases by the People’s Bank of China, which added around 10 tons to its reserves last month. That was the highest monthly total since 2024 and extends the Chinese central bank’s buying streak to 19 months, underscoring continued interest from one of the world’s biggest purchasers.