Gold prices rise; Trump intends to end the war if the Strait of Hormuz is closed

Gold continues its rally, after reports that U.S. President Donald Trump is willing to end the Iran war without reopening the Strait of Hormuz. Additionally, Federal Reserve officials’ statements have weakened market expectations for rate hikes.

Gold prices rose as much as 1.8%, approaching $4,585 per ounce, after a previous trading day increase of 0.4%. The Wall Street Journal reported that Trump told aides he would be willing to end U.S. military actions against Iran even if the Strait of Hormuz remains largely blocked. This statement boosted market expectations for an end to the conflict.

Furthermore, Federal Reserve Chair Jerome Powell stated that although the war has caused oil prices to surge, intensifying inflation pressures and rate hike expectations, the U.S. long-term inflation outlook still appears manageable. He said the central bank’s policy is “in the right place,” and “we will see.”

In recent days, dip-buyers have entered the gold market, with investors taking advantage of the decline in gold prices since the outbreak of the Iran war in late February to buy the dip.

The White House has escalated threats against Iran, including attacks on key civilian infrastructure. Tehran approved a bill to charge tolls on ships passing through the Strait of Hormuz and urged Yemen’s Houthi forces to prepare to restart attacks targeting Red Sea shipping. Kuwait Petroleum recently announced that a Kuwaiti oil tanker was attacked by Iran at Dubai port.

The developments have raised concerns that the conflict could persist long-term, potentially leading to further energy price increases and prompting central banks worldwide to raise interest rates to curb inflation. This is undoubtedly negative for non-interest-bearing precious metals. Coupled with broader liquidity tightening in financial markets, gold prices have fallen about 13% this month.

Recommended reading: Trump pressures Iran to reopen the Strait, threatens to “destroy” key energy infrastructure

At 10:23 Singapore time, spot gold rose 1.6% to $4,581 per ounce. Silver increased 3.4% to $72.47 per ounce. Platinum and palladium prices also rose. The Bloomberg U.S. Dollar Index was roughly flat, up 0.3% in the previous trading day.

Extended reading: Goldman Sachs remains bullish on gold, expects prices to reach $5,400 by year-end

Despite recent declines, Goldman Sachs maintains a bullish outlook on gold and predicts prices will rally again before the end of 2026.

Analysts Lina Thomas and Daan Struyven stated in their report that the medium-term outlook for gold remains solid, with prices potentially reaching $5,400 per ounce, citing ongoing central bank purchases and expectations of two more rate cuts in the U.S. this year as main reasons.

They noted that, in the short term, gold faces “tactical downside risks,” and if energy supply shocks intensify, prices could fall to $3,800 per ounce. However, if the Iran war accelerates investor diversification away from “traditional Western assets,” there is still significant upside potential for gold.

Since the war began a month ago, gold prices have fallen 13%, driven by stock market declines forcing investors to liquidate positions, and markets beginning to price in tighter monetary policy. However, analysts say this repricing is “excessive, reflecting an overemphasis on inflation and neglecting growth concerns,” and history shows that growth worries tend to dominate eventually.

They also mentioned that concerns about some central banks selling gold to support their currencies are unlikely to materialize. Instead, they believe Gulf countries are more likely to intervene by selling U.S. Treasuries, as they “typically peg to the dollar.”

Finally, analysts suggest that, barring additional private sector investments, price volatility is expected to moderate in the medium term, allowing official sector purchases to accelerate again, averaging around 60 tons per month.