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Gold prices fell slightly on Monday amid increasing demand for the U.S. dollar, triggered by the U.S. attack on key nuclear facilities in Iran, which marked an escalation in the Middle Eastern conflict.
At 01:08 ET (05:08 GMT), spot gold was down 0.2% at $3,360.11 per ounce, and gold futures dropped 0.3% to $3,374.72/oz. Despite this dip, the yellow metal remained supported by strong gains earlier in June, driven by the onset of the Israel-Iran conflict and the resulting haven demand.
Dollar Strength Pressures Gold Amid Geopolitical Tensions
The primary pressure on gold came from the strengthening U.S. dollar, which gained more than 0.3% against a basket of currencies. The dollar’s rise was primarily attributed to increased safe haven demand following the U.S. military’s attack on three key Iranian nuclear facilities over the weekend.
President Donald Trump confirmed that the strikes had successfully eliminated Iran’s nuclear ambitions, though Iranian officials have consistently denied accusations of pursuing nuclear weapons. The escalation has prompted fears of Iranian retaliation, including the potential closure of the Strait of Hormuz, a crucial global shipping route, further fueling concerns over energy supply disruptions.
Oil Prices Surge as Market Fears Iranian Retaliation
As a result of these geopolitical developments, oil prices surged sharply. This increase in oil prices added to the anxiety about rising global inflation, keeping expectations of high interest rates in place for longer. These concerns about inflation contributed to the stronger demand for the U.S. dollar, which in turn pressured gold.
Federal Reserve’s Hawkish Stance Continues to Weigh on Gold
The dollar’s strength was also reinforced by the Federal Reserve’s cautious stance on future rate cuts. After the Fed’s recent meeting, the central bank has shown no immediate commitment to easing rates, leading to sustained demand for the dollar. The central bank’s cautious approach is further underlined by the upcoming two-day testimony from Fed Chair Jerome Powell before Congress, which may provide more clarity on future rate policies.
Platinum and Silver Prices Cool After Strong Rally
Broader metal markets also saw a cooling effect, with platinum and silver retreating after their strong rallies in recent weeks. Platinum futures fell 0.1% to $1,263.15/oz, pulling back from a four-year high hit last week. Meanwhile, silver futures rose 0.1% to $36.05/oz, staying near their 13-year peak.
In industrial metals, copper prices experienced modest declines, with benchmark copper futures on the London Metal Exchange down 0.1% at $9,643.15 per ton, and U.S. copper futures falling 0.3% to $4.820 per pound.
Outlook: Focus on Dollar and U.S. Fed
The outlook for gold and other metals remains tied to geopolitical developments and the Federal Reserve’s stance on interest rates. The ongoing U.S.-Iran conflict, coupled with the Fed’s cautious approach, is likely to keep risk appetite subdued, providing support for the dollar at the expense of non-yielding assets like gold.
