Gold Falls by More Than 2% Amid Rising Inflation Concerns Due to Tensions in the Middle East

SadaNews Economy: Gold prices fell by more than 2% on Monday, continuing their decline to the lowest levels in nearly four months, amid escalating tensions in the Middle East and the concerns it raised about inflation and expectations of rising interest rates globally.

Gold dropped in spot transactions by 2.5% to $4,372.78 per ounce, marking the ninth consecutive session of decline.

The yellow metal, which touched its lowest level during trading today since January 2, fell by more than 10% during the past week.

U.S. futures contracts for April gold fell by 4.7% to $4,360.40.

In an escalation of the conflict ongoing for three weeks, Iran announced on Sunday that it would target the energy and water networks of its Gulf neighbors, in response to U.S. President Donald Trump's threat to strike Iran's electricity network within 48 hours.

The Iranian Revolutionary Guard stated that if Iranian energy facilities are attacked, the Strait of Hormuz will be completely closed, and will not be reopened until those facilities are rebuilt.

In contrast, oil prices remained above $110 a barrel, as investors balanced the mutual threats between Washington and Tehran regarding targeting energy facilities, and the possibility of releasing millions of barrels of Iranian oil stored at sea into global markets.

The threats to close the Strait of Hormuz contributed to supporting oil prices, leading to increased inflationary pressures due to rising transportation and manufacturing costs. Although high inflation usually enhances gold's appeal as a safe haven, rising interest rates reduce the demand for non-yielding assets.

In the same context, market expectations for the U.S. Federal Reserve to raise interest rates this year have increased, as estimates from the CME FedWatch tool indicate that the probability of a rate hike by December is about 27%, which exceeds previous expectations of a reduction.

As for other precious metals, silver fell in spot transactions by 3.3% to $65.55 per ounce. Platinum dropped by 4.4% to $1,838.45, while palladium declined by 0.4% to $1,398.50.