Gold prices fell more than 1% on Monday as renewed geopolitical tensions in the Middle East and surging oil prices shifted market focus toward rising inflation risks.
The decline came as Brent crude climbed sharply after President Donald Trump said the US Navy seized an Iranian-flagged vessel in the Gulf of Oman, escalating tensions around the Strait of Hormuz. Tehran said it targeted ships and reasserted control over the waterway, arguing that US actions violated a ceasefire agreement.
The renewed conflict has heightened concerns over a prolonged energy supply shock, pushing oil prices higher and reinforcing expectations of stickier global inflation.
Gold, which is often used as a hedge against uncertainty, came under pressure as investors weighed the likelihood of tighter monetary policy in response to renewed inflationary risks. Higher interest rate expectations typically reduce demand for non-yielding assets such as bullion.
Sentiment was also dampened by signs that diplomatic progress remains fragile, despite ongoing discussions. US President Donald Trump said there was still scope for a deal and confirmed that negotiators would travel to Pakistan for further talks, although Iran has signaled limited optimism.
Despite the daily decline, the metal remains up 8.73% over the past month and nearly 40% higher year-on-year, reflecting sustained safe-haven demand earlier in the year.
