Gold falls on stronger dollar, fading Fed rate-cut hopes
- Spot gold was down 0.6% at $4,718.98 per ounce
- US gold futures for June delivery fell 1% to $4,742
Gold prices fell to a near one-week low on Monday, pressured by a stronger dollar, while a surge in oil prices following failed US-Iran peace talks fuelled inflation worries and dampened expectations for Federal Reserve interest rate cuts this year.
Spot gold was down 0.6% at $4,718.98 per ounce, as of 0222 GMT, after hitting its lowest level since April 7 earlier in the session.
US gold futures for June delivery fell 1% to $4,742.
The dollar strengthened 0.4% while oil prices jumped above $100 a barrel, as the U.S. Navy prepared a blockade of the Strait of Hormuz that could restrict Iranian oil shipments after the US and Iran failed to reach a deal to end the war.
Iran’s Revolutionary Guards responded by warning that military vessels approaching the Strait will be considered a ceasefire breach and dealt with harshly and decisively.
“Ceasefire optimism has unwound following the failure of the peace talks, and the resulting push higher by the dollar and oil prices has put gold on the back foot again,” said Tim Waterer, chief market analyst, KCM Trade.
Spot gold has fallen more than 11% since the U.S.-Israeli war on Iran began on February 28.
“As soon as oil prices push back above $100, attention quickly turns to potential central bank rate hikes to curb inflation, and it is this interest rate outlook which is undermining gold’s performance,” Waterer said.
Traders now see little chance of a US rate cut this year, as higher energy prices threaten to feed into broader inflation and limit the scope for monetary easing.
Before the war in the Middle East began, there were expectations for two Fed rate cuts this year.
While inflation typically boosts gold’s appeal as a hedge, elevated interest rates weigh on the non-yielding metal. A stronger dollar makes greenback-priced bullion more expensive for other currency holders.
Among other metals, spot silver fell 2.2% to $74.23 per ounce, platinum lost 0.5% to $2,034.95, while palladium gained 1% to $1,535.77.