Gold Prices Decline as Dollar Strengthens and Iran-US Talks Collapse

Gold prices declined on Monday, pressured by a stronger dollar and renewed inflation concerns that clouded the outlook for future interest-rate cuts after U.S.-Iran peace talks collapsed over the weekend.

Spot gold was down 0.3% at $4,734.50 per ounce as of 1:37 p.m. ET (1737 GMT), after hitting its lowest since April 7 earlier in the session. U.S. gold futures settled 0.4% lower at $4,767.40. The U.S.

dollar drifted higher, making greenback-priced metals more expensive for holders of other currencies. "It's a very headline-driven market. All eyes are on the price of crude oil because crude oil is going to direct inflation and that is going to direct Federal Reserve policy," said Phillip Streible, chief market strategist at Blue Line Futures.

After negotiations collapsed, the U.S. military said it would blockade ships leaving Iran's ports, while Tehran threatened to retaliate against the ports of its Gulf neighbours. Oil prices jumped following the announcement, stoking inflation concerns and limiting room for central banks to cut interest rates.

Elevated rates reduce the appeal of zero-yield bullion, despite its role as an inflation hedge. Markets now see around a 29% chance of a U.S. rate cut by year-end, according to CME's FedWatch Tool, down from 40% a month earlier.

Spot gold has fallen over 10% since the U.S.-Israel war against Iran began on February 28. "We see the war-induced selloff as healthy for gold's longer-term prospects, with more speculative positioning reduced," analysts at SP Angel said. Meanwhile, spot silver was down 0.2% at $75.71 per ounce.

Uncertainty over future oil supply is likely to drive strong structural demand for silver through accelerated investment in solar photovoltaics, Paul Wong, market strategist at Sprott Asset Management, said in a note. Platinum rose 0.3% to $2,050.80, while palladium gained 3% to $1,566.15.