NEW YORK: Gold fell on Monday as the US-Israeli war on Iran fuelled inflation concerns, which dimmed near-term US interest rate cut prospects and boosted the dollar.
Spot gold was down 1.2percent at USD5,109.39 per ounce as of 1012 GMT, after falling more than 2percent earlier. US gold futures for April delivery lost 0.8percent to USD5,118.20.
“Historically, it is not uncommon to see gold falling as first reaction when financial markets show stress signs as gold is a highly liquid asset,” said UBS analyst Giovanni Staunovo.
Stock markets in Asia nosedived as the inflationary jolt from surging oil prices threatened to raise living costs and interest rates across the globe, while investors desperate for liquidity fled to the US dollar, propelling it to a more than three-month high.
The dollar index was up near three-month highs. A stronger greenback makes bullion more expensive for holders of other currencies. “Market participants are translating higher oil prices in rising inflation and central banks turning more hawkish,” Staunovo added. Oil prices rose more than 15percent to levels not seen since mid-2022 as some major producers cut supplies and fears of prolonged shipping disruptions gripped the market.
Meanwhile, Iran on Monday named Mojtaba Khamenei to succeed his slain father Ali Khamenei as supreme leader. Investors are increasingly expecting the US Federal Reserve to hold rates steady at its two-day meeting on March 18. The odds of a June hold, which were below 43percent last week - when the war began, climbed to more than 51percent, per CME Group’s FedWatch tool.
US 10-year Treasury yields climbed to a one-month high, further raising the cost of holding non-interest yielding gold. Spot silver was down 0.3percent at USD84.07 per ounce, after losing over 5percent earlier in the session. Spot platinum lost 1percent to USD2,113.97 and palladium fell 1.3percent to USD1,604.09.