Gold prices fell to a more-than-one-month low on Thursday, weighed down by a firm dollar and a hawkish Federal Reserve, which limited hopes for near-term interest rate cuts.
Spot gold fell 1.1% to $4,764.27 per ounce as of 0649 GMT, its lowest since February 6.
US gold futures for April delivery fell 2.6% to $4,770.
Spot gold has fallen more than 9% since the US-Israeli strike on Iran on February 28, pressured by a stronger dollar, which has emerged as one of the clearest “safe-haven” winners.
As the dollar firms, greenback-priced bullion becomes more expensive for holders of other currencies.
“Gold continues to struggle in this high dollar and high oil environment despite ongoing heightened geopolitical risks. Increased market volatility is also leading to some gold positions being closed to cover margin calls in other assets,” said Tim Waterer, KCM Trade chief market analyst. Global equities slid, and oil prices rose above $110 a barrel after a major escalation in the Middle East war rattled investors.
The Fed and Bank of Canada both struck hawkish tones on Wednesday after they held rates steady as surging energy prices arising from the Iran conflict clouded the inflation outlook.
Both central banks warned of risks that rising energy costs could fan a more persistent inflation spike.
“Expectations for incoming US rate cuts have been a cornerstone of gold’s ascent, but spiking oil prices have dampened hopes for monetary easing, which has somewhat pulled the rug out from under the gold price,” said Waterer.
While a rising inflation backdrop typically boosts gold’s appeal as a hedge, high interest rates reduce demand for the non-yielding metal. Meanwhile, US President Donald Trump’s administration is considering deploying thousands of US troops to reinforce operations in the West Asia.
Spot silver fell 4.3% to $72.14 per ounce. Spot platinum fell 2.1% to $1,981.48, and palladium lost 1% to $1,461.