NEW YORK: Gold prices fell on Monday as fresh US-Iran tensions lifted oil prices and sparked fears of inflation, bolstering expectations of higher interest rates.
Spot gold slid 1.03 percent to USD4,045.95 per ounce by 8:51 a.m. ET (12:51 GMT), while US gold futures for August delivery fell. Prices hit a more than seven-month low last week.
“The market is attuned to Middle East headlines, (with) some uptick in tensions over the weekend and still adjusting to a more hawkish Fed tilt,” said Peter Grant, vice president and senior metals strategist at Zaner Metals.
On Sunday, Iran launched missiles and drones at US military sites in Kuwait and Bahrain, shortly after US President Donald Trump threatened to wipe out the Iranian leadership if they failed to adhere to the terms of the final peace agreement.
Brent crude futures rose following the attacks.
While gold is traditionally considered a safe haven, higher energy prices due to the war have raised concerns of inflation and higher interest rates, which would weigh on the non-yielding metal.
The US Federal Reserve held interest rates steady this month, but policymakers expect a hike later this year amid growing concerns about inflation lodged above the US central bank’s 2 percent target.
Meanwhile, the U.S dollar was headed for its biggest monthly gain in nearly a year. A stronger dollar makes gold more expensive for overseas buyers.
Market participants now await ADP employment data on Wednesday and the US nonfarm payrolls data on Thursday for further clues on the Fed’s monetary policy stance.
“(Gold) could edge to new lows if the employment data still looks pretty strong, that supports the higher-for-longer Fed stance,” Grant added.
Traders are pricing in an about 60 percent chance of an interest rate hike by September.
Among other metals, spot silver slid 1.21 percent to USD58.4467 per ounce, platinum dropped 1.88 percent to USD1,584.00, and palladium eased 0.07 percent to USD1,208.28.
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