Gold slips as focus remains on Middle East, rate outlook

Gold prices slipped on Monday as market participants assessed developments in the Middle East and their implications for inflation and interest rates.

Spot gold fell 0.3% to $4,362.60 per ounce by 0417 GMT after hitting a one-week high on Friday.

US gold futures were down 0.6% at $4,400.20.

Iran and the United States exchanged new threats, with President Donald Trump warning Iran would fail economically or face its leadership being wiped out if it didn’t make a deal, and the Iranian military saying it would retaliate harshly to any fresh attack.

“The focus remains on geopolitics, oil and the reaction in bond yields. For gold to gain meaningful upside traction, a clear move lower in oil and/or bond yields is likely required,” said Tim Waterer, chief market analyst at KCM Trade.

“Gold may trade in a roughly $4,200 to $4,580 range in the near term.” Oil prices fell on hopes diplomacy in the Iran war will get a chance this week amid a UN meet and as investors eyed a partial recovery in shipments from Saudi Arabia despite ongoing attacks by Yemen’s Houthis.

The prospect of a new global rate-tightening cycle has come into focus as some of the world’s top central banks raise rates and signal more may be needed to tame inflation fuelled by the Iran war.

The Bank of Japan became the latest big central bank to tighten on Friday, following rate increases by the Federal Reserve earlier that week and the European Central Bank the week before.

Though gold is often seen as an inflation hedge, rising rates tend to curb its demand by making interest-bearing assets more attractive.

Analysts at Standard Chartered said in a note that gold remains volatile but continues to find firm downside support from official-sector demand.

They said structural drivers remain in place to lift prices, albeit at a slower pace.

Among other metals, spot silver rose 0.2% to $66.37, platinum fell 0.1% to $1,798.31 and palladium added 0.6% at $1,309.65.