Gold prices slipped more than 2 per cent on
Monday, extending their drop to a roughly four-month low, as an
escalating Middle East conflict stoked inflation concerns and
expectations of higher global interest rates.
Spot gold was down 2.5 per cent at $4,372.86 per ounce, as of
0238 GMT, extending losses for a ninth consecutive session. The
metal, which fell on Monday to its lowest level since January 2,
lost more than 10 per cent last week.
US gold futures for April delivery fell 4.4 per cent to
$4,375.60.
“With the Iranian conflict into its fourth week, and oil
prices hanging around the $100 level, expectations have pivoted
from rate cuts to potential rate hikes which has tarnished
gold’s appeal from a yield point of view,” said Tim Waterer,
chief market analyst, KCM Trade.
Escalating the three-week-old war, Iran said on Sunday it
would strike the energy and water systems of its Gulf neighbours
in retaliation if US President Donald Trump follows through
with a threat delivered a day earlier to hit Iran’s electricity
grid in 48 hours.
“Gold’s high liquidity appears to be hurting it during this
risk-off period. Steep selloffs on stock markets in Asia today
are leading to a further unwinding in long gold positions,”
Waterer said.
Asian shares fell and oil prices stayed above $110 a barrel,
as investors weighed US and Iranian threats to target energy
facilities.
The closure of the Strait of Hormuz kept crude elevated,
stoking inflation through higher transport and manufacturing
costs. While rising inflation typically boosts gold’s appeal as
a hedge, high interest rates curb demand for the non-yielding
asset.
Meanwhile, market pricing for a US Federal Reserve
interest rate hike this year has shot up, and is now seen as far
more likely than a rate cut, as interest rate futures were
pricing around a 27 per cent chance of a rate hike by December, as per
the CME FedWatch tool.
Spot silver lost 3.2 per cent to $65.61 per ounce. Spot
platinum fell 2.9 per cent to $1,866.65 and palladium was
down 0.5 per cent at $1,397.25.