NEW YORK: Gold prices fell nearly 2 percent on Monday as heightened US-Iran tensions boosted the dollar and reinforced inflation concerns that kept expectations of higher interest rates alive.
Spot gold was down 1.9 percent at USD4,526.88 per ounce, by 11:26 a.m. ET (1526 GMT). US gold futures fell 2.3 percent to USD4,537.90.
“The latest news clearly didn’t give the market confidence that everything is going to be okay and again raised the specter of inflation issues, along with fairly hawkish signals to the market on interest rates,” said Bart Melek, global head of commodity strategy at TD Securities.
A fire broke out at the Fujairah Oil Industry Zone, authorities in the emirate said, following what they described as a drone attack originating from Iran. While, the US military said two US Navy guided-missile destroyers had entered the Gulf to break an Iranian blockade.
The US dollar firmed and Brent prices jumped more than 5 percent. A stronger US currency makes dollar-priced metals more expensive for holders of other currencies.
Meanwhile, soaring energy prices have intensified inflation fears, strengthening bets that central banks will keep interest rates higher for longer.
Barclays joined a growing list of brokerages to bet on no policy easing from the US Federal Reserve this year. Last week, the Fed left rates unchanged in its most divided decision since 1992 on deepening concerns about higher energy prices percolating through the economy.
Key data due this week include US job openings, the ADP employment report and the April payrolls report.
Even as gold serves as a hedge against inflation and geopolitical uncertainty, the metal loses appeal in a high-rate environment as it offers no yield.
“I see strong support levels around USD4,200 for gold. I do think there are broader issues later in the year that could support prices. However, uncertainty and possible rate hikes could push some traders to exit positions in the near term,” Melek said.
Spot silver fell 2.9 percent to USD73.12, platinum lost 2.1 percent to USD1,947.05, and palladium shed 3.5 percent to USD1,471.50.