Gold is once again caught between fear and yield. Fresh US-Iran strikes in the Gulf have pushed oil higher, reviving concern that energy costs could keep inflation sticky.
Yet bullion is not getting much safe-haven help. Instead, traders are focused on what higher crude could mean for the Federal Reserve.
Spot gold fell 0.7% to $4061.35 an ounce in early trade on Monday, while August futures slipped 0.5% to $4076.40.
The metal is now on course for a fourth monthly decline, with losses of more than 10% in June.
Oil shock revives inflation worries
The latest pressure came after renewed military exchanges between Washington and Tehran over the weekend.
Iran launched missiles and drones at US military sites in Kuwait and Bahrain, after fresh American strikes in the Gulf raised doubts over the fragile ceasefire.
Oil rose as traders reassessed the risk around the Strait of Hormuz, a waterway that carries a major share of global crude and LNG shipments.
Brent and WTI had fallen sharply in recent weeks as tanker traffic improved, but the weekend escalation showed how quickly the risk premium can return.
For gold, the oil move is uncomfortable. Higher crude prices can lift inflation expectations, which would normally support bullion.
This time, however, the market is treating energy inflation as a reason for tighter monetary policy.
Fed bets keep bullion under pressure
Traders now expect at least one Fed rate increase this year and see roughly an 80% chance of a December hike, according to CME FedWatch.
That is the main reason gold has struggled to benefit from geopolitical anxiety.
The metal does not pay interest, so it tends to lose appeal when cash and bonds offer higher returns.
A firmer dollar has added another headwind, making dollar-priced bullion more expensive for buyers using other currencies.
Analysts said the market is no longer trading gold purely as a crisis hedge. It is being driven by the interaction between oil, inflation expectations and the Fed’s reaction function.
That makes the next batch of US data critical.
Jobs data becomes the next test
Investors will turn to June ADP employment figures and the nonfarm payrolls report later this week for clues on whether the labour market is still strong enough to tolerate higher rates.
A softer set of numbers could help gold stabilise by cooling the dollar and easing rate expectations.
But a resilient labour market would strengthen the case for further tightening and keep rallies under pressure.
Diplomacy remains another swing factor.
Washington and Tehran have reportedly agreed to halt recent hostilities and restart talks on the Strait of Hormuz, but the weekend strikes showed how fragile that process remains.
Silver fell 1.1% to $58.51 an ounce. Platinum gained 1% to $1630.13, while palladium rose 0.8% to $1218.92.
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