COMEX gold opened lower this morning before staging a brief, minor rebound. As of the latest update, the decline stands at approximately 1.35%.

Geopolitical tensions have escalated again. Less than 24 hours after Iran announced the opening of the Strait of Hormuz, the country's military has re-closed the strategic waterway. Iran's Revolutionary Guard Corps Navy has established a new route from south of Hormuz Island to south of Larak Island, prohibiting passage without permission. Meanwhile, the US and Iran have exchanged accusations of attacking vessels during the ceasefire period. On the same day, Israel conducted strikes in southern Lebanon, claiming to have eliminated several Hezbollah members and emphasizing that such threat-neutralizing operations are not restricted by the ceasefire. With just three days remaining in the two-week US-Iran ceasefire agreement, fissures have emerged on multiple fronts, rapidly cooling previously rising expectations for peace.

Despite the deterioration in the situation, the window for negotiation remains open. A US delegation has arrived in Islamabad, Pakistan. Former President Trump stated that the US has proposed a "very fair and reasonable" agreement. However, Iran has taken a hardline stance, accusing the US of maintaining a maritime blockade and shifting its position during the ceasefire. Iran has yet to decide whether to send representatives to the talks. Trump has expressed confidence that a peaceful agreement with Iran can still be reached.

Overall, geopolitics remain the primary market focus. Before markets begin pricing in recession expectations, the interplay between energy-driven inflation and Federal Reserve monetary policy constitutes the main dynamic. If negotiations show substantive progress, a retreat in oil prices could cause expectations for interest rate cuts to resurface and fluctuate. In such a scenario, gold could maintain relative strength as risk appetite recovers. Recent comments from Fed Governor Waller indicated that if the Middle East situation calms quickly, interest rate cuts later this year remain possible. Conversely, if talks collapse or the ceasefire agreement is abandoned, a reversal in risk-off sentiment coupled with rising oil prices could put renewed pressure on gold prices. Given that, despite hardline postures, the involved parties still appear inclined towards a negotiated resolution, traders are advised to manage positions cautiously until the negotiation outlook becomes clearer, awaiting confirmation of a directional trend. Alternatively, based on this assessment, one might consider buying on dips during periods of market volatility.