US President Donald Trump rejected Iran’s latest peace offer to end the ongoing conflict in the Middle East, labeling Iran’s response as 'totally unacceptable' according to Bloomberg, as reported by both sources [1][2]. Iranian officials, meanwhile, insisted that the US must pay compensation for war damages and rejected the US plan, which they claimed would force Iran to submit to excessive demands [1]. The mutual rejection of peace proposals has heightened geopolitical uncertainty and contributed to a fragile ceasefire, particularly impacting the Strait of Hormuz and the safety of shipping through the vital waterway [1][2].
In response to these developments, gold prices (XAU/USD) slumped below $4,700, falling to around $4,690 during the early Asian session on Monday [1]. The precious metal faced selling pressure as the prospect of prolonged conflict increased inflation fears and expectations for higher interest rates, both of which weigh on non-yielding assets like gold [1]. Technical analysis indicates bearish momentum for gold, with immediate resistance at $4,700 and key support at $4,690; a break below this level could open further downside [1].
The EUR/USD currency pair also edged lower, trading near 1.1765, as the Euro softened against the US Dollar amid the cautious market mood following the rejection of peace proposals [2]. The ongoing conflict is seen as a potential boost for the safe-haven US Dollar, creating headwinds for the Euro in the near term [2]. However, the hawkish tone of the European Central Bank (ECB) could provide some support to the Euro, with markets pricing in a 92% probability of a 25 basis point hike at the June meeting and a total of three hikes anticipated by the end of 2026, according to Reuters [2].
US economic data released on Friday showed that Nonfarm Payrolls (NFP) rose by 115K in April, surpassing the forecast of 62K but falling short of the 185K recorded in March [1][2]. The Unemployment Rate held steady at 4.3%, in line with market consensus [1][2]. Strong US job data and a steady unemployment rate have provided some support to the US Dollar, which inversely impacts gold prices and weighs on the EUR/USD pair [1][2].
Market participants remain cautious, with gold trading near support levels and the Euro under pressure from both geopolitical uncertainty and robust US economic data [1][2].
CONCLUSION
The rejection of peace proposals between the US and Iran has intensified geopolitical risks, leading to declines in both gold and the Euro while supporting the US Dollar. Strong US labor data and expectations of higher interest rates further weigh on non-yielding assets and risk-sensitive currencies. Market sentiment remains cautious as traders monitor developments in the Middle East and central bank policy outlooks.