Gold prices fell in Tuesday's trading session as new US attacks on Iran caused oil prices to rebound, thereby increasing concerns about inflation and strengthening expectations that interest rates will remain high for a longer time.
As of 2:40 PM Vietnam time, spot gold prices fell 1.06% to 4,523.02 USD/ounce. Meanwhile, US gold futures for June delivery edged up 0.2% to 4,529.60 USD/ounce.
US Secretary of State Marco Rubio said that negotiating an agreement with Iran may take "some more days", thereby reducing expectations of a possible early end to the conflict. This statement was made just one day after US forces launched airstrikes that Washington described as defensive in southern Iran.
Mr. Kelvin Wong - Senior Market Analyst at OANDA - said that although the US and Iran are getting closer to a peace agreement, damage to oil production infrastructure in the Middle East may make it difficult for global energy supplies to return to normal soon.
The market has begun to reflect this scenario as expectations of the Fed raising interest rates this year have increased significantly," he said.
Brent oil prices rose about 2% in Asian trading on Tuesday as the prospect of reaching an agreement to end the conflict and reopen the Strait of Hormuz is still not really clear.
Oil prices maintaining at a high level may continue to drive inflation and force central banks to maintain high interest rates for longer.
Although gold is often seen as an inflation hedging tool, high interest rates put pressure on precious metals because gold does not bring yields.
According to CME Group's FedWatch tool, the market is currently valuing about 56% of the possibility that the Fed will raise interest rates before the end of this year.
In other precious metals markets, spot silver prices fell 2.1% to 76.45 USD/ounce. Platinum fell 1% to $1,948.12 an ounce, while palladium fell 1.4% to $1,378.89 an ounce.
