Gold Forecast: XAU/USD declines sharply to near $4,400 as Middle East fears revive

LONDON (March 26) Gold price (XAU/USD) is down 2% to near $4,410 during the European trading session on Thursday. The precious metal has come under pressure after a strong recovery in the last three trading days, as fears of persistent war in the Middle East have revived, following Iran’s rejection to United States (US) President Donald Trump’s month-long ceasefire proposal and 15-point settlement plan.

Theoretically, heightened geopolitical tensions boost demand for safe-haven assets, such as Gold.

However, the precious metal faces backlash amid fears that persistent Middle East conflicts would keep oil prices higher, which already have prompted inflation expectations, a scenario that restricts global central banks from easing monetary conditions and improves the demand for non-yielding assets, such as Gold.

Iran’s foreign minister Abbas Araghchi said on Wednesday that the country is reviewing a US proposal to end the war in the Gulf but has no intention of holding talks to end the widening Middle East conflict, Reuters.

Also, a senior Iranian official told Al Jazeera that the proposal is “extremely maximalist and unreasonable”.

In the 15-point proposal, the US demanded Iran’s restriction to building nuclear weapons, and no uranium enrichment on Iranian territory.

Meanwhile, Iran has also put forward conditions for ending the war, which include the closure of all US bases in the Gulf, compensation for attacks on Tehran's infrastructure, lifting all sanctions, and allowing Iran to retain its missile program without restrictions.

FXStreet