Gold slips as focus remains on Middle East, rate outlook

Gold prices fell on Monday as investors focused on developments in the Middle East and their impact on inflation and interest rates. The price of spot gold dropped 0.3% to $4,362.60 per ounce by 0417 GMT, after peaking at a one-week high on Friday. US gold futures also declined 0.6% to $4,400.20. Tensions escalated between Iran and the United States, with President Donald Trump warning Iran of economic consequences if no deal was reached, and Iran's military threatening a harsh response to any new attack.

The focus, according to Tim Waterer, chief market analyst at KCM Trade, remains on geopolitics, oil, and bond yields. Waterer noted that for gold to see significant upside, a clear drop in oil and/or bond yields is likely necessary. Analysts predict gold could trade within a range of $4,200 to $4,580 in the near term. Oil prices dropped due to hopes for diplomacy in the Iran conflict progressing during a UN meeting, and expectations of a partial recovery in shipments from Saudi Arabia despite ongoing Houthi attacks.

The potential for a new global rate-tightening cycle has emerged as several major central banks, including the Bank of Japan, have raised rates and indicated further increases may be required to combat inflation driven by the Iran war. Despite gold generally being viewed as an inflation hedge, higher interest rates often reduce its demand by making interest-bearing assets more appealing.

Standard Chartered analysts stated that while gold remains volatile, it continues to find strong support from official-sector demand. Among other precious metals, silver rose 0.2% to $66.37, platinum fell 0.1% to $1,798.31, and palladium increased 0.6% to $1,309.65.