Gold prices fell on Monday as renewed military tensions between the United States and Iran pushed oil prices higher and increased concerns that rising energy costs could keep inflation elevated, strengthening expectations of tighter monetary policy.
Spot gold declined 1.55% to $4,057.15 per ounce, extending recent losses as investors assessed the impact of fresh strikes in the Middle East and looked ahead to key U.S. inflation data due later this week.
The decline came after the United States carried out its fourth strike against Iran in a week on Sunday, following an Iranian attack on a Cyprus-flagged container ship. Tehran later announced that the Strait of Hormuz would be closed “until further notice”, although the claim was rejected by the U.S. Central Command.
The Strait of Hormuz is a critical route for global energy shipments, and concerns over possible disruptions have pushed oil prices higher, raising fears that higher fuel costs could slow progress in reducing inflation.
Gold, often viewed as a safe-haven asset during periods of geopolitical uncertainty, has also been pressured by expectations that higher inflation could encourage the U.S. Federal Reserve to keep interest rates elevated.
Investors are now awaiting U.S. inflation figures for further signals on the Fed’s policy direction. Markets currently expect the central bank to deliver one more interest-rate increase before the end of the year.
Fed Chair Kevin Warsh is also scheduled to make his first appearance before the U.S. Congress on Tuesday, where investors will look for clues on the central bank’s outlook for interest rates.
Despite Monday’s decline, gold remains significantly higher than a year ago, gaining about 21.37% over the period. However, the metal has fallen 5.86% over the past month as shifting expectations around interest rates and global risks weigh on demand.