Gold prices fell in Monday's trading session amid concerns that a sharp increase in energy costs could cause inflation to continue to escalate, forcing major central banks, including the US Federal Reserve (Fed), to maintain a tougher monetary policy stance. This weakens the attractiveness of gold, an asset that does not yield yields.
Spot gold prices fell 0.7% to 4,986.96 USD/ounce in this afternoon's trading session. Meanwhile, US gold futures for April delivery fell 1.5% to 4,987.30 USD/ounce.
Mr. Bernard Dahdah - analyst at Natixis - said that the gold market has now shifted its focus from the impacts of the closure of the transport route through the Strait of Hormuz to the long-term consequences for inflation.
According to him, higher oil prices mean higher inflation, thereby directly affecting Fed policy. The US central bank may change its direction, stop cutting interest rates and this will put downward pressure on gold prices.
Oil prices remained above $100/barrel, up more than 40% this month and to the highest level since 2022 after US and Israeli airstrikes on Iran caused Tehran to stop transporting oil through the Strait of Hormuz.
On Sunday, US President Donald Trump called on allies to support the protection of the Strait of Hormuz, as Iranian forces continue to attack this strategic shipping route as the war between the US, Israel and Iran has entered its third week.
The Fed is expected to hold a two-day policy meeting this week and is likely to keep interest rates unchanged.
In addition to the Fed, a series of other major central banks such as the European Central Bank, the Bank of England and the Bank of Japan will also meet this week. The market is particularly interested in policymakers' assessments of the impact of the Iran war on inflation, economic growth and policy orientations in the coming time.
UBS believes that central banks are likely to closely monitor inflation risks but are not in a hurry to raise interest rates suddenly.
The longer the US-Iran conflict lasts, the greater the risk of negative impacts on the global economy. This could boost the need for risk hedging for gold.
On the other precious metal market, spot silver prices fell 2.6% to 78.46 USD/ounce. Platinum prices remained flat at 2,024.85 USD/ounce.
