Spot gold prices increased by 0.2% to $4,516.76 per ounce as of 0051 GMT, driven by a weaker dollar. The easing of the dollar has made gold more affordable for holders of other currencies.
Meanwhile, geopolitical tensions have escalated as Iran accused the United States of violating a ceasefire near the Strait of Hormuz, complicating peace efforts.
U.S. Secretary of State Marco Rubio indicated that negotiations to halt the conflict could take a few days, despite previous progress towards an agreement.
U.S. consumer confidence has declined in May due to inflation concerns linked to the ongoing conflict in Iran, although there is optimism for labor market improvements by year-end.
Investors are closely watching upcoming remarks from U.S. Federal Reserve policymakers and the U.S. Personal Consumption Expenditures data for April, due on Thursday, for insights into future monetary policy.
UBS has adjusted its year-end gold price target down by $400 to $5,500, citing risks from higher yields and the dollar.
Background
The ongoing conflict in Iran and its impact on global markets have heightened investor caution. The Strait of Hormuz is a critical chokepoint for global oil shipments, and any disruption could have significant economic repercussions.
As geopolitical tensions and economic data continue to unfold, investors will be closely monitoring developments in U.S.-Iran negotiations and Federal Reserve policy signals for further market direction.
