Gold slips as focus remains on Middle East, rate outlook

New York markets saw a decline in gold prices on Monday as investors focused on Middle East developments and their impact on inflation and interest rates. Spot gold dropped 0.3% to $4,362.60 per ounce by 4:17 GMT after peaking at $4,362.60 a week earlier. US gold futures also decreased by 0.6% to $4,400.20.

Tensions between Iran and the United States escalated, with President Donald Trump warning Iran of dire consequences if it failed to reach an agreement. Meanwhile, Iran threatened severe retaliation against any new attacks. The focus remains on geopolitics, oil prices, and the reaction in bond yields. To gain significant upside, gold would likely need a clear decline in oil or bond yields, according to Tim Waterer, chief market analyst at KCM Trade.

Gold prices may fluctuate within a range of $4,200 to $4,580 in the near term. Oil prices fell as hopes grew for diplomatic progress in the Iran situation, aided by a UN meeting and a potential recovery in Saudi Arabian oil shipments despite Houthi attacks. The possibility of a new global rate-tightening cycle has emerged, as several major central banks raised interest rates and hinted at further hikes to combat inflation caused by the Iran war.

The Bank of Japan joined the trend, following increases by the Federal Reserve and the European Central Bank.

Although gold is typically viewed as an inflation hedge, rising interest rates often reduce its appeal by making interest-bearing assets more attractive. Standard Chartered analysts noted that gold remains volatile but is backed by strong demand from official sectors. They believe structural factors will eventually boost prices, albeit at a slower pace. Other metals experienced minor changes, with spot silver up 0.2% to $66.37, platinum down 0.1% to $1,798.31, and palladium up 0.6% to $1,309.65.