Gold prices fell by more than 3% on Monday, extending losses to their lowest level in nearly four months, as escalating conflict in the Middle East fueled concerns about inflation and expectations of higher global interest rates.
Spot gold dropped 3.3% to $4,340.09 per ounce by 01:00 GMT, marking its ninth consecutive session of losses.
The metal had already fallen to its lowest level since January 2, declining by more than 10% last week.
U.S. gold futures for April delivery also fell by 5% to $4,347.
In an escalation of the three-week conflict, Iran said on Sunday it would target energy and water networks in neighboring Gulf countries in response to U.S. President Donald Trump’s warning a day earlier that he would strike Iran’s power grid within 48 hours.
Iran’s Revolutionary Guard stated that if Iranian power plants are attacked, the Strait of Hormuz would be completely closed and would not reopen until the damaged facilities are rebuilt.
Oil prices remained above $110 per barrel, as investors weighed U.S. and Iranian threats to target energy infrastructure—raising the risk of further escalation—against the possibility of releasing millions of barrels of Iranian oil stored at sea into global markets.
The closure of the Strait of Hormuz has contributed to rising crude oil prices, exacerbating inflation through higher transportation and manufacturing costs. While rising inflation typically boosts gold’s appeal as a hedge, higher interest rates tend to reduce demand for non-yielding assets.
Meanwhile, market expectations have increased that the U.S. Federal Reserve will raise interest rates this year. According to CME’s FedWatch tool, this is now seen as far more likely than a rate cut, with futures pricing indicating about a 27% probability of a rate hike by December.
Among other precious metals, spot silver fell 3.3% to $65.55 per ounce. Platinum dropped 4.4% to $1,838.45, while palladium edged down 0.4% to $1,398.50.
(Reuters)
