Khaberni - Gold prices fell more than 3% on Monday, continuing their decline to their lowest level in nearly four months, as escalating conflict in the Middle East stoked fears about inflation and expectations of rising global interest rates.
Gold in spot transactions fell 3.3% to $4340.09 an ounce by 01:00 GMT, continuing its losses for the ninth consecutive session.
The metal dropped to its lowest level since January 2nd, falling more than 10% last week.
U.S. gold futures for April delivery fell 5% to $4347.
In an escalation of the ongoing war for three weeks, Iran said on Sunday that it would bomb power and water networks in its Gulf neighbors in response to a threat by U.S. President Donald Trump the day before to strike the Iranian power grid within 48 hours.
The Iranian Revolutionary Guard stated that if Iranian power stations were attacked, the Strait of Hormuz would be completely closed and would not be opened until the destroyed power stations were rebuilt.
Oil prices remained above $110 per barrel, as investors balanced the U.S. and Iranian threats of targeting energy facilities that could lead to an escalation of the war, and the possibility of releasing millions of barrels of Iranian oil held at sea into the global markets.
The closure of the Strait of Hormuz contributed to an increase in crude oil prices, exacerbating inflation through rising transport and manufacturing costs. While rising inflation usually enhances the attractiveness of gold as a hedge, rising interest rates limit demand for non-yielding assets.
Meanwhile, market expectations that the Federal Reserve (the U.S. central bank) would raise interest rates this year have increased and according to the CME FedWatch tool, the probability of an interest rate hike by December is now seen as much more likely than a rate cut, with futures pricing in about a 27% chance of a hike by December.
For other precious metals, the spot price of silver fell 3.3% to $65.55 an ounce. The spot price of platinum fell 4.4% to $1838.45, while the price of palladium decreased 0.4 percent to $1398.50.
