Gold Prices Drop 2% Amid Rising Inflation Concerns

Gold prices declined by about 2% on Monday, driven by renewed tensions between the United States and Iran, which increased inflation concerns and strengthened expectations that central banks might maintain tighter monetary policies for a longer period.

Spot gold fell 1.9% to $4,451.65 per ounce by 1401 GMT, after reaching a two-week high on Friday.

Meanwhile, US gold futures dropped 2.5% to $4,479.20.

The US dollar gained ground, raising the cost of gold priced in the American currency for holders of other currencies.

Jim Wyckoff, a market analyst at American Gold Exchange, stated, "Gold is likely to remain under pressure due to expectations of continued interest rate hikes until bond yields stop rising and interest rates begin to stabilize or decrease."

Iran announced it had attacked a US airbase following US airstrikes targeting Iranian military sites earlier in the week.

The Tasnim news agency reported that the Iranian negotiation team decided to cease exchanging messages with the United States through intermediaries.

Oil prices continued to rise, intensifying inflation fears linked to the Iranian conflict, which could prompt central banks to increase interest rates to curb mounting price pressures.

According to the CME Group's FedWatch tool, traders currently assign a 56% probability that the Federal Reserve will raise interest rates at least once this year.

Gold is regarded as a hedge against inflation but loses appeal when interest rates are high because it does not yield any income.

Other precious metals also declined: spot silver dropped 1.7% to $73.96 per ounce, platinum decreased 0.4% to $1,908.91, and palladium fell 0.8% to $1,343.04.