Gold prices edged higher on Tuesday morning, with U.S. spot gold trading around 1% higher at $4,553.69 per ounce and front-month gold futures up by 0.6% to settle at around $4,553 [1]. Despite this uptick, gold is on track for a monthly decline of 14.6%, marking its biggest drop since October 2008, when prices fell 16.8% [1]. The ongoing U.S.-Iran war, now in its fifth week, has contributed to heightened uncertainty and volatility in the markets [1][2]. The Wall Street Journal reported that U.S. President Donald Trump is willing to end military hostilities against Iran even if the Strait of Hormuz remains largely closed, and stated that Washington is "in serious discussions" with Iranian officials, but warned of potential attacks on Iranian infrastructure if a deal is not reached soon [1][2]. U.S. Secretary of State Marco Rubio indicated that Washington's objectives in Iran would take "weeks, not months" to achieve [1][2]. Reuters reported the arrival of 2,500 U.S. Marines in the Middle East, with officials identifying them as members of the elite 82nd Airborne Division [1].
The conflict has led to surging oil and gas prices, raising expectations of an inflation spike and potential interest rate hikes across economies [1][2]. However, U.S. Treasury yields edged lower on Tuesday morning, with the 10-year Treasury yield down 2 basis points at 4.321%, and yields on 2-year and 30-year Treasurys falling by 1 and 2 basis points, respectively [2]. Money markets are now overwhelmingly pricing in zero rate cuts from the Federal Reserve for the rest of the year, according to the CME's FedWatch tool [2]. Last week, futures traders briefly pushed the probability of a rate increase by the end of 2026 to 52% [2]. Federal Reserve Chair Jerome Powell stated that inflation expectations remain grounded despite rising energy prices, so the central bank does not need to respond with higher interest rates [2].
Wayne Nutland, Investment Manager at Shackleton Advisers, noted that gold's trading dynamics have shifted since the Ukraine war, with gold previously inversely correlated to real bond yields and the U.S. dollar. He observed that gold has now reverted to its traditional relationships, falling as bond yields and the U.S. dollar have moved higher, and suggested that declines may be exacerbated by investors liquidating profitable positions [1]. Iain Barnes, chief investment officer at Netwealth, commented that gold price volatility has been running at twice its historical level in recent months, driven by increased participation from financial investors [1].
Investors are also monitoring upcoming economic data, including the February JOLTs jobs report, which is due out at 10 a.m. ET on Tuesday [2].
CONCLUSION
Gold is experiencing its steepest monthly decline since 2008, driven by the ongoing U.S.-Iran conflict and surging oil prices that have heightened inflation concerns. Despite elevated volatility and shifting investor dynamics, the Federal Reserve is signaling no immediate rate hikes, and Treasury yields have edged lower as traders reassess monetary policy. The market remains highly sensitive to geopolitical developments and upcoming economic data.