Gold Crashes Below $4,500 as Iran Threatens Hormuz Blockade

International gold prices plunged below the psychologically critical $4,500 per ounce mark on June 1, 2026, as escalating Middle East tensions and a strengthening U.S. dollar triggered a sharp sell-off in safe-haven assets. COMEX August gold futures briefly dropped to approximately $4,455 per ounce — a decline of nearly 2.5% — before settling near $4,487, according to Xinhua News. Spot gold closed at $4,484.66 per ounce, down $58.65, or 1.29%, on the first trading day of June.

The Trigger: Escalation in the Strait of Hormuz

The price collapse was precipitated by a dramatic escalation in the ongoing Strait of Hormuz crisis. Over the weekend prior to June 1, the U.S. military conducted what it described as “self-defense strikes” on Iranian radar and drone command facilities on Qeshm Island and in the Goluk region. Iran’s Islamic Revolutionary Guard Corps (IRGC) retaliated by striking a U.S. air base.

On Monday, June 1, Iran escalated further. Iranian media reported that Tehran and the “Resistance Front” planned to completely block the Strait of Hormuz — a chokepoint through which approximately 20% of the world’s oil and LNG supply transits — and expand operations to the Bab el-Mandeb Strait. Iran also suspended all indirect negotiations with the United States, demanding that Israel immediately cease military operations in Lebanon and Gaza and withdraw from Lebanon.

“Iranian officials stated that Israel must immediately cease military operations in Lebanon and Gaza and withdraw from Lebanon. Iran will not hold any negotiations until these demands are met,” Iran’s Tasnim News Agency reported.

Market Turmoil: Oil Surges, Gold Falls

The geopolitical shockwaves rippled through global markets. WTI crude surged 5.49% to $92.16 per barrel, while Brent crude rose 4.24% to $94.98 per barrel, as traders priced in the risk of a full blockade of one of the world’s most critical energy arteries.

For gold, the sell-off reflected a confluence of pressures. The May ISM Manufacturing PMI rose to 54.0, well above expectations, strengthening the U.S. dollar and reinforcing expectations that the Federal Reserve would maintain high interest rates for longer. Rising energy costs pushed up inflation expectations, forcing central banks to maintain tight monetary policy — a headwind for non-yielding gold.

“Under the dual pressure of a strong dollar and deteriorating geopolitical conditions, spot gold plunged sharply on the first trading day of June, eventually closing near $4,485, with a single-day decline of nearly 2%, officially breaking through the key psychological threshold of $4,500,” Chinese financial outlet NBD (每日经济新闻) reported in its market analysis.

The $4,500 Threshold: A Psychological Breaking Point

The breach of $4,500 per ounce is significant. Market analysts had identified this level as a critical psychological support zone, and its breakdown signaled a shift in market sentiment from cautious观望 (wait-and-see) to bearish. Gold had already experienced a volatile May, trading in a range between $4,365.85 and $4,773.58 per ounce, with a monthly decline of 1.80%.

Institutional investors appeared to be reducing risk exposure. SPDR Gold Trust holdings fell to 1,028.856 tonnes, while iShares Silver Trust holdings were reduced by 37.99 tonnes. China’s largest gold ETF, the Huaan Gold ETF (518880), maintained assets under management of 103.87 billion yuan, but the broader trend pointed to outflows.

Conflicting Signals: Trump Says Iran ‘Really Wants’ a Deal

Despite the military escalation, President Donald Trump stated on June 1 that Iran “really wants” to reach an agreement and that it would be “an agreement favorable to the United States and our allies.” Trump criticized domestic political pressure from both Democrats and Republicans, who he said were creating “constantly negative noise” about the negotiations, adding that “ultimately everything will be fine, and it always has been.”

The apparent contradiction between military action and diplomatic overtures underscored the uncertainty gripping markets. Both sides acknowledged serious disagreements remained on Iran’s nuclear program and the status of the Strait of Hormuz.

China’s Mediating Role

China has played a significant mediating role throughout the crisis. On May 14, during President Trump’s second visit to China, President Xi Jinping pledged that China would not provide military aid to Iran and would assist in reopening the Strait of Hormuz. China opposes both the militarization of the strait and the imposition of tolls by Iran, which has selectively allowed passage for friendly nations including China, Russia, and India.

Outlook: What’s Next for Gold?

The outlook for gold remains deeply uncertain. In the short term, analysts at Citigroup have set a $4,300 per ounce target, warning that if Hormuz tensions ease, both safe-haven and inflation-hedge premiums could diminish. Morgan Stanley cut its H2 2026 target from $5,700 to $5,200, arguing that gold pricing has returned to a traditional real interest rate framework.

However, structural factors continue to support gold over the long term. Goldman Sachs maintains a bullish $5,400 per ounce year-end target, citing structural central bank gold buying. Huaan Fund notes that core drivers — global de-dollarization, central bank purchases, and U.S. fiscal deficits eroding dollar credit — remain unchanged.

Key questions hang over the market: Will Iran actually implement a full blockade of Hormuz, or is this a negotiating tactic? Can U.S.-Iran negotiations be revived after the military escalation? And will China’s mediation efforts succeed in de-escalating the crisis?

For now, all eyes are on the Strait of Hormuz — and on whether gold can find support above $4,400 per ounce.