Gold prices fall as traders move into safe haven dollar on Trump’s Iran escalation

Investing.com -- Bullion prices slipped on Thursday, with gold futures set to snap a four-day win streak, as investors reacted to renewed escalation signals from President Donald Trump on the Iran conflict.

Trump said the U.S. would "hit" Iran "extremely hard over the next two to three weeks," while offering no solution to the reopening of the critical Strait of Hormuz.

Oil prices surged on the comments, spurring expectations of higher interest rates for longer and a jump into the safe haven dollar, in turn weighing on the yellow metal. 

At 16:23 ET (20:23 GMT), spot gold was down 2% to $4,665.07/oz, and U.S. Gold Futures declined 2.5% to $4,692.67/oz. 

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Trump throws cold water on de-escalation hopes

Spot gold had been on a three-day win streak while gold futures on a four coming into a scheduled nation to the address by Trump late on Wednesday. The advance had been fueled by traders moving back into the beaten down yellow metal, which in March logged its worst month since October 2008.

However, Trump said the U.S. will ramp up its operation against Iran in the coming weeks and that Washington was close to achieving its objectives.

"We are going to hit them extremely hard over the next two to three weeks. We are going to bring them back to the stone ages where they belong. In the meantime, discussions are ongoing … We have all the cards; they have none," the president said. He reiterated the need to debilitate Iran’s nuclear capabilities, and also claimed that Iran’s navy and missile strike capabilities had been largely wiped out.

The strong rhetoric spooked investors who had received several positive signals towards de-escalation earlier this week.

"President Trump’s address last night disappointed investors who were looking for details on how and when the Iran war will end," José Torres, senior economist at Interactive Brokers, said.

"The commander in chief’s apprehensive posture included warnings that the adversary would be hit extremely hard in the next few weeks, and those hostile comments, along with other statements, sent WTI crude up from around $97 when he started his speech at approximately 9:00 pm EDT to $105 at midnight and just short of $114 this morning," Torres said.

Oil prices continued to surge into Thursday’s session, with Brent futures expiring in June, the global benchmark, last up 7.1% to $108.29 a barrel.

UBS trims gold price forecast

"The next few weeks could hold more consolidation and choppy price action for gold as market participants continuously recalibrate geopolitical risks in response to the volatile news cycle," UBS strategist Joni Teves said in a note. 

"But rising concerns about the growth-inflation mix and the persistence of geopolitical tensions reinforce the trend of investors diversifying into gold to help protect portfolios," Teves added.

UBS trimmed its average gold price forecast for the year to $5,000 from $5,200, citing mark-to-market adjustments for the first quarter, while keeping its year-end target unchanged at $5,600.

Among other precious metals, silver prices fell 3.2% to $72.6595/oz on Thursday, while platinum added 0.6% to $2,001.15/oz.

Base metals draw some eyes

There was some focus on base metals on Thursday, in the wake of the Trump administration’s move to strengthen tariffs imposed on imported steel, aluminum, and copper.

According to a White House fact sheet, the president signed an order to establish clear rules for calculating Section 232 metals tariffs by outlining a tiered system.

These rules include establishing a 50% tariff rate on articles made entirely or almost entirely of aluminum, steel, or copper such as steel coils and aluminum sheet. Meanwhile, derivative articles substantially made of steel, aluminum, or copper will be subjected to a 25% tariff rate.

Aluminum prices recently have jumped to near four-year highs due to supply disruptions from the Middle East conflict.  

Benchmark Copper Futures on the London Metal Exchange settled 0.8% higher at $12,434.50 a ton, while U.S.Copper Futures lost 0.2% to $5.6330 a pound.

Ayushman Ojha and Vahid Karaahmetovic contributed to this article