Gold prices sank to their lowest level in almost two months on Thursday as a renewed flare-up in hostilities between the United States and Iran boosted global oil prices and the US dollar, weighing on demand for the precious metal. Investor fears over prolonged geopolitical tensions and increasing inflation pressure from surging crude oil prices caused spot gold to tumble in overseas markets.
The dollar’s rise to a near one-week high on a flare-up in the Middle East made gold more expensive for holders of other currencies and less attractive, analysts said.
Higher oil prices also raised fears of a longer period of high inflation which prompted investors to anticipate a tightening of monetary policy by the US Federal Reserve. Higher interest rate expectations tend to pressure non-yielding assets like gold.
Gold is traditionally viewed as a safe-haven investment in times of uncertainty but the current environment has made investors focus on the dollar amid fears of inflation and energy supply disruptions, market experts said.
Spot gold fell to its lowest since late March, reports said, while silver, platinum and palladium also fell back in global commodity markets.
Investors now await upcoming US economic data and Federal Reserve signals for more clarity on future interest rate decisions.
Traders also remain focused on developments in the Middle East, as any easing in tensions between Washington and Tehran could influence both oil and gold prices in the coming days.
