Gold prices (XAU/USD) climbed to nearly $4,630 during the early Asian session on Friday, extending a recent rally as renewed tensions in the Middle East prompted traders to seek safe-haven assets [1]. The escalation follows statements from US President Donald Trump, who reaffirmed his commitment to a naval blockade of Iranian ports amid concerns that the vital Strait of Hormuz would remain closed for an extended period. Trump described Iran's economy as 'crashing' and 'a disaster,' emphasizing the impact of the blockade [1]. In response, Iranian President Masoud Pezeshkian labeled the US naval blockade as an 'extension of military operations' and declared it 'intolerable' [1].
The ongoing US–Iran tensions and the closure of the Strait of Hormuz have heightened inflation fears, which could complicate the outlook for interest rate cuts. While gold typically benefits from geopolitical uncertainty, its lack of yield makes it less attractive in a high interest rate environment [1]. The US Federal Reserve held its key policy rate steady on Wednesday, with Fed Chair Jerome Powell noting that the economic outlook remains highly uncertain, partly due to the Middle East conflict [1].
Central banks continue to play a significant role in the gold market, with purchases reaching 1,136 tonnes (worth about $70 billion) in 2022, the highest annual total on record according to the World Gold Council [1]. Emerging economies such as China, India, and Turkey have been rapidly increasing their gold reserves [1]. Gold's price movement is also influenced by its inverse correlation with the US Dollar and US Treasuries, as well as with risk assets like equities [1].
CONCLUSION
Gold's advance above $4,600 reflects heightened safe-haven demand amid escalating US–Iran tensions and uncertainty over the Strait of Hormuz. The market remains sensitive to geopolitical developments and central bank actions, while the Federal Reserve's steady rate stance adds to the cautious outlook. Investors are closely watching for further developments that could impact inflation and interest rate expectations.