Gold Slides as Middle East Tensions Revive Inflation and Rate Worries

Gold fell on Monday as renewed Middle East tensions threatened to stoke inflation and reinforce expectations of higher-for-longer interest rates, a backdrop that tends to hurt non-yielding assets like bullion.

By 07:15 ET, spot gold dropped 1.3% to $4,035.82 an ounce and futures fell 1.1% to $4,049.92.

The US and Iran have reportedly agreed to halt tit-for-tat strikes in the Strait of Hormuz, reopening the waterway to free passage, though Iran has yet to confirm the deal, according to The New York Times. Talks on implementing a memorandum of understanding are set to continue, with the two sides potentially meeting in Doha as early as Tuesday.

Oil steadied near pre-war levels, but the recent uptick kept fears of energy-driven inflation alive, along with expectations that the Federal Reserve and other central banks will raise rates before year-end.

A stronger US dollar added pressure, making gold pricier for overseas buyers. The greenback has held up as a relative safe haven during the conflict, partly on the view that the US, as a major energy exporter, is more insulated from rising oil prices.

This week’s US employment report, plus data on consumer confidence, job openings and private payrolls, should offer a fresh read on the economy.