Gold Prices Decline as Dollar Strengthens Amid Renewed Tensions Between US and Iran

Gold prices experienced a decline on Monday, attributed to a strengthening U.S. dollar. As of 0351 GMT, spot gold was down by 0.7%, trading at $4,793.98 per ounce, after reaching its lowest point since April 13 earlier in the session. Meanwhile, U.S. gold futures for June delivery fell 1.4% to $4,813.60.

Ilya Spivak, head of global macro at Tastylive, noted that the drop in gold prices follows a breakdown of the U.S.-Iran war ceasefire that markets had previously celebrated. This resurgence of conflict dynamics has led to increased crude oil prices, which in turn has fueled inflation expectations and pushed both U.S. yields and the dollar higher.

The dollar index's strength has made gold, priced in dollars, more expensive for holders of other currencies. Additionally, benchmark 10-year U.S. Treasury yields rose by 0.5%. As tensions in the Middle East escalated, oil prices surged and stock markets showed volatility, prompting minimal shipping activity in the Gulf. Following the seizure of an Iranian cargo ship by the U.S., Iran threatened retaliation, raising doubts about the durability of the ceasefire set to expire on Tuesday. Since late February, gold prices have fallen approximately 8% due to concerns that escalating energy prices might contribute to prolonged high inflation and interest rates. Although gold is typically viewed as a hedge against inflation, rising interest rates can dampen its demand.

On another note, gold demand in India during one of its significant buying festivals was subdued on Sunday, as record prices limited jewelry purchases, countering a slight increase in investment demand. In the metals market, spot silver decreased by 0.9% to $80.04 per ounce, platinum fell by 0.5% to $2,093.56, while palladium remained steady at $1,558.60.