Gold, silver and platinum resumed their recent sell-off on Monday, but recovered strongly from initial sharp losses as fresh hopes of a de-escalation of the Iranian conflict buoyed investors.
The price of spot gold had fallen more than 5% on Monday morning, at $4,262.50, before recovering to trade at $4,412 at 11:40 a.m. in London (7:40 a.m. ET).
The whipsawing followed an announcement by President Donald Trump that the U.S. would postpone its strikes on Iranian energy infrastructure after “good and productive” talks between the two nations.
Gold futures were last seen around 4% lower, at $4,392, having earlier dipped almost 10%.
Gold spot.
The precious yellow metal lost almost 10% last week in its worst showing since September 2011. Spot gold has now lost around 25% since hitting a record high of $5,594.92/oz at the end of January.
Spot silver, meanwhile, was down 5.9% at $63.76, a year-to-date low and almost half of its $117 level on Feb. 28, when the Iran war began. While heavy selling seen earlier in the day eased slightly, silver futures were still trading 8.3% lower on Monday at $63.98.
Silver futures.
The sell-off extended to other precious metals, with platinum futures plummeting 9.7% to $1,780.20, while palladium dropped 4.7% to $1,377.50.
The retreat from gold — which is traditionally seen as a key safe haven asset in times of market turmoil — chimes with the ongoing risk-off sentiment in markets as the Iran conflict fuels concerns over inflation and rising energy prices.
The prospect of higher interest rates as a result of the war could boost government bonds among investors, at the expense of non-yielding precious metals, market strategists told CNBC recently.
However, euro zone government bond yields were once again moving higher in early trading on Monday as the conflict’s latest escalation left few hiding places for investors.
Earlier, after Trump had issued an ultimatum to Iran calling for the reopening of the Strait of Hormuz, and Iran threatened buyers of U.S. Treasury bonds, Nic Puckrin, co-founder of Coin Bureau, said this could end the long gold rally of the past year.
“The stakes in the Iran war just escalated and what we’re seeing is the ultimate flight to safety. This is exactly how crowded momentum trades come to an end,” Puckrin said.
“What we’re seeing in precious metals signals that central banks and Gulf states are tapping into the gold reserves that they have built over the past couple of years. The focus has moved from accumulation to capital preservation. This will put a natural cap on gold prices.”