Gold prices fell to a near one-week low on Monday, pressured by a stronger dollar, while a surge in energy prices fuelled inflation worries and dampened expectations for U.S. Federal Reserve interest rate cuts this year.
Spot gold was down 1.1% at $4,694.30 per ounce by 0100 GMT, its lowest level since April 7. U.S. gold futures for June delivery fell 1.4% to $4,717.80.
The dollar index strengthened, making greenback-priced bullion more expensive for other currency holders.
Oil prices jumped above $100 a barrel, stoking inflation fears, as the U.S. Navy prepared a blockade of the Strait of Hormuz that could restrict Iranian oil shipments after the U.S. 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, underlining the risk of a dangerous escalation.
Spot gold has fallen over 11% since the U.S.-Israel conflict with Iran began on February 28.
Traders now see little chance of a U.S. 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 of two Fed rate cuts for this year.
While inflation typically boosts gold’s appeal as a hedge, elevated interest rates weigh on the non-yielding metal’s demand.
Gold demand in India picked up slightly last week ahead of a key festival, although elevated prices weighed on sentiment, while premiums in China narrowed as retail demand slowed.
SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.1% to 959.24 tonnes on Thursday.
Among other metals, spot silver fell 1.9% to $74.45 per ounce, platinum lost 1.3% to $2,019.35, while palladium gained 0.7% to $1,531.50.
