Gold prices declined on Monday after fresh U.S.-Iran military actions in the Gulf region drove oil prices upward. At the same time, growing expectations of U.S. Federal Reserve interest rate increases pressured the non-yielding metal.
Spot gold fell 0.7 percent to $4,061.35 per ounce by 0242 GMT. August U.S. gold futures dropped 0.5 percent to $4,076.40. The metal is on track for a fourth straight monthly decline of 10.4 percent.
Analyst Tim Waterer noted that renewed strikes between the U.S. and Iran over the weekend raise questions about how long oil prices can remain low and what this means for inflation and interest rates.
Oil prices increased after Iran fired missiles and drones at U.S. sites in Kuwait and Bahrain on Sunday, following threats from President Donald Trump. Later, both sides agreed to pause hostilities and resume talks on the Strait of Hormuz dispute.
Higher crude prices can increase inflation and the likelihood of rate hikes. Although gold often serves as an inflation hedge, it becomes less attractive as a non-yielding asset when rates rise.
Traders anticipate three Fed rate increases this year, with an 80 percent probability priced in for December, according to the CME FedWatch Tool.
Attention now turns to upcoming June ADP employment figures and U.S. nonfarm payrolls data, both scheduled later this week.
Waterer added that gold might reach $5,000 again this year if tensions ease further, oil returns to pre-conflict levels, and the dollar weakens.
