TLDR
- Spot gold declined 1.5% to $5,096.51/oz during Monday’s trading, reaching an intraday low of $5,015.23/oz
- Oil prices spiked dramatically — with Brent crude momentarily approaching $120/barrel — triggering inflation concerns that pressured gold
- The greenback index climbed as much as 0.7%, adding downward pressure on precious metals
- Despite the retreat, gold maintains a position above $5,000/oz and shows approximately 18% gains for the year
- Other precious metals including silver, platinum, and palladium also declined Monday, with silver recovering most losses
Precious metals experienced a significant retreat on Monday as the ongoing US-Israel military engagement with Iran reached its tenth day, triggering a dramatic spike in crude oil prices and strengthening the dollar — creating a double pressure point for gold.
Spot gold dropped 1.5% to $5,096.51/oz during mid-morning trading hours in London. The session’s lowest point saw the precious metal touch $5,015.23/oz, momentarily threatening to slip beneath the psychologically important $5,000 threshold. Meanwhile, gold futures contracts declined 1.1% to $5,104.04/oz.
The downturn occurred as Brent crude oil experienced a dramatic surge of up to 30%, momentarily approaching $120 per barrel, following weekend military strikes by US and Israeli forces targeting Iranian oil infrastructure. Tehran retaliated by launching attacks on vessels navigating the Strait of Hormuz, a critical chokepoint responsible for approximately 20% of worldwide oil transportation.
The oil spike immediately triggered market speculation about inflationary pressures — and their potential implications for monetary policy.
Inflation Fears Put Fed Back in Focus
Rising crude oil prices create widespread economic cost increases, potentially driving inflation upward. This development diminishes expectations for Federal Reserve interest rate reductions — and could even increase the likelihood of rate hikes. Gold, which generates no yield, typically underperforms when interest rates are anticipated to remain elevated or increase.
The Bloomberg Dollar Spot Index advanced 0.3% Monday following a 1.3% gain during the previous week. A strengthening dollar increases gold’s cost for international purchasers, creating additional downward pressure.
“In periods of geopolitically driven market stress, investors sometimes sell assets such as gold to raise cash,” said Christopher Wong, strategist at Oversea-Chinese Banking Corp. “Once that phase passes, geopolitical uncertainty typically continues to underpin demand for safe havens on dips.”
This dynamic tension — safe-haven appeal competing against interest rate concerns — has characterized gold’s volatile trading patterns in recent weeks. The precious metal has fluctuated between $5,000/oz and an all-time high near $5,600/oz achieved in late January.
Gold experienced approximately 2% losses during the previous week. Friday’s disappointing US employment data temporarily boosted expectations for rate reductions, but the oil price explosion quickly overshadowed this optimism.
Other Metals Also Under Pressure
Silver temporarily fell beneath $80/oz before staging a recovery. The metal concluded Monday’s session down 0.9% at $83.82/oz. Platinum decreased 1.8% while palladium dropped 1.7%. Copper futures contracts slipped 0.7% to $12,781.0 per ton.
Notwithstanding Monday’s decline, gold maintains approximately 18% year-to-date gains. Central bank acquisitions have provided consistent support, with the People’s Bank of China continuing its gold purchasing streak for a 16th consecutive month through February.
Ed Meir, analyst at Marex, noted in a Friday commentary that a rapid conflict resolution would likely weaken the dollar and support gold prices, while prolonged hostilities would push yields and the dollar higher based on inflation expectations. Brent crude was most recently trading approximately 12.5% higher for the day.
