BY COMFORT OGBONNA
Gold prices edged lower on Monday, falling to their weakest level in nearly a week as a strengthening dollar and surging oil prices combined to pressure the precious metal. The decline comes amid rising inflation concerns sparked by escalating geopolitical tensions following the collapse of U.S.-Iran peace talks, which have significantly altered expectations for interest rate cuts by the Federal Reserve this year.
Spot gold dropped 0.4% to $4,726.64 per ounce as of early trading, after touching an intraday low of $4,643—its weakest level since April 7. U.S. gold futures for June delivery also declined, slipping 0.8% to $4,748.70. The pullback highlights how sensitive gold remains to shifts in currency strength and interest rate expectations, even during periods of geopolitical instability.
The U.S. dollar gained around 0.3%, making gold more expensive for investors using other currencies and reducing its appeal globally. At the same time, oil prices surged back above $100 per barrel as tensions in the Middle East intensified. The United States is reportedly preparing to enforce a naval blockade in the Strait of Hormuz, a critical route for global oil shipments, after failing to secure a peace agreement with Iran.
Iran’s Revolutionary Guards have responded with strong warnings, signaling that any military vessels entering the strategic waterway could be treated as violating the ceasefire and face decisive retaliation. This sharp escalation has heightened fears of prolonged disruption to global energy supplies, further fueling inflation concerns across international markets.
Market analysts note that the renewed surge in oil prices has quickly shifted investor focus toward the risk of persistent inflation. Higher energy costs tend to ripple through economies, raising the price of goods and services and complicating the outlook for central banks. As a result, expectations for interest rate cuts have weakened considerably.
Gold, traditionally viewed as a safe-haven asset during times of uncertainty, has not benefited as much in this environment. While geopolitical risks and inflation fears typically support gold demand, higher interest rates reduce its attractiveness because it does not yield interest. Investors often shift toward interest-bearing assets when borrowing costs rise, putting downward pressure on gold prices.
The metal has now fallen more than 11% since the onset of the U.S.-Israeli conflict with Iran in late February, reflecting the dominance of monetary policy expectations over safe-haven demand in recent weeks. Analysts point out that each time oil prices climb above the $100 mark, markets begin to anticipate tighter monetary policy from central banks attempting to control inflation, which in turn weighs on gold.
Traders are increasingly pricing out the possibility of a Federal Reserve rate cut this year, a significant shift from earlier expectations before the Middle East conflict began. At that time, markets had anticipated at least two rate cuts in 2026. Now, with inflation risks rising, policymakers may be forced to maintain higher rates for longer, limiting gold’s upside potential.
Other precious metals also experienced mixed movements. Silver dropped 1.9% to $74.41 per ounce, reflecting broader weakness in the sector. Platinum edged down 0.2% to $2,041.89, while palladium bucked the trend, gaining 0.5% to $1,527.95.
Overall, gold’s recent decline underscores the complex forces currently shaping global markets. While geopolitical tensions would typically drive investors toward safe-haven assets, the combined impact of a stronger dollar and rising interest rate expectations has outweighed those factors. With oil prices remaining elevated and uncertainty surrounding central bank policy growing, gold may continue to face headwinds in the near term unless there is a significant shift in either inflation trends or global risk sentiment.
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