Gold edged lower on Monday, weighed down by waning hopes of near-term US interest-rate cuts due to elevated energy prices, while a softer dollar helped limit losses.
Spot gold was down 0.2 per cent at $5,007.58 per ounce, as of 0240 GMT. US gold futures for April delivery fell 1 per cent to $5,011.10.
The dollar nudged lower, making greenback-priced commodities such as bullion cheaper for holders of other currencies.
The US 10-year Treasury yields eased, increasing the appeal of non-yielding bullion.
“If higher energy prices push inflation higher and the Fed stays cautious about cutting rates, that could keep real yields elevated, which tends to be a headwind for gold,” said Christopher Wong, a strategist at OCBC.
Oil remained above $100 a barrel as the US-Israeli war against Iran entered a third week, putting oil infrastructure at risk and keeping the Strait of Hormuz shut in the biggest disruption to global supplies ever.
Higher crude prices feed into inflation by raising transportation and production costs. Gold is considered an inflation hedge, but high interest rates make yield-bearing assets more attractive, weighing on its appeal.
“In the near term, (gold’s) price action may remain choppy as markets reassess the Fed policy path and the trajectory of real yields,” Wong said.
The US Federal Reserve is widely expected to hold interest rates steady for a second straight meeting when it gives its policy statement on Wednesday. Meanwhile, US President Donald Trump said on Sunday his administration is talking to seven countries about helping to secure the Strait of Hormuz. Trump threatened more strikes on Iran’s main oil export hub, Kharg Island, over the weekend and said he was not ready to reach a deal to end the war. Trump insisted that nations relying heavily on oil from the Gulf have a responsibility to protect the strait.
Spot silver fell 1.2 per cent to $79.57 per ounce. Spot platinum gained 0.8 per cent to $2,042.98 and palladium rose 1 per cent to $1,566.91.