Key Highlights
- Spot gold declined 1.5% to $5,096.51/oz during Monday trading, reaching a session low of $5,015.23/oz
- Brent crude oil temporarily approached $120/barrel, triggering inflation concerns that weighed on gold
- The US dollar index climbed as much as 0.7%, creating headwinds for precious metals
- Gold continues trading above $5,000/oz with year-to-date gains of approximately 18%
- Silver, platinum, and palladium experienced declines on Monday, with silver recovering most losses
Precious metals experienced significant downward pressure on Monday as the ongoing US-Israel conflict with Iran reached its tenth day, triggering a substantial rally in oil prices and strengthening the dollar — developments that created challenging conditions for gold and related assets.
Spot gold declined 1.5% to $5,096.51/oz during mid-morning London trading hours. The session’s lowest point saw prices touch $5,015.23/oz, coming close to falling beneath the $5,000 threshold. Gold futures decreased 1.1% to $5,104.04/oz.
The decline occurred as Brent crude experienced a surge of up to 30%, temporarily approaching $120 per barrel, following weekend strikes by US and Israeli forces on Iranian oil infrastructure. Iran retaliated by targeting vessels in the Strait of Hormuz, a critical waterway responsible for approximately 20% of worldwide oil transportation.
The oil spike immediately triggered investor concerns regarding inflation and its potential implications for monetary policy.
Rising Inflation Concerns Shift Federal Reserve Expectations
Elevated crude oil prices increase costs throughout the economy, potentially driving inflation upward. This development diminishes expectations for Federal Reserve rate reductions and could even increase the likelihood of rate increases. Gold, which generates no yield, typically underperforms when interest rates are anticipated to remain elevated or increase further.
The Bloomberg Dollar Spot Index advanced 0.3% on Monday following a 1.3% gain during the previous week. Dollar strength makes gold more costly for international purchasers, compounding downward pressure.
“In periods of geopolitically driven market stress, investors sometimes sell assets such as gold to raise cash,” said Christopher Wong, strategist at Oversea-Chinese Banking Corp. “Once that phase passes, geopolitical uncertainty typically continues to underpin demand for safe havens on dips.”
This dynamic — safe-haven demand competing against rate concerns — has characterized gold’s volatile trading patterns in recent weeks. The metal has fluctuated between $5,000/oz and a near-record high of $5,600/oz reached in late January.
Gold retreated approximately 2% during the previous week. Friday’s disappointing US employment data temporarily boosted expectations for rate cuts, but the oil rally quickly dominated market sentiment.
Broader Precious Metals Market Faces Headwinds
Silver temporarily fell below $80/oz before staging a recovery. The metal concluded Monday’s session down 0.9% at $83.82/oz. Platinum decreased 1.8% while palladium dropped 1.7%. Copper futures slipped 0.7% to $12,781.0 per ton.
Despite Monday’s retreat, gold maintains year-to-date gains of approximately 18%. Central bank purchases have provided consistent support, with the People’s Bank of China adding to its gold reserves for the 16th consecutive month in February.
Ed Meir, analyst at Marex, noted in a Friday commentary that a swift resolution to the conflict would likely weaken the dollar and support gold, while a protracted war would drive yields and the dollar higher on inflation expectations. Brent crude was last trading up approximately 12.5% for the day.
