Gold Slides 1.5% Amid Iran Conflict as Oil Rally and Greenback Strength Weigh

TLDR

Table of Contents

The spot price of gold declined 1.5% to $5,096.51/oz during Monday trading, with the session low hitting $5,015.23/oz
Brent crude oil prices spiked dramatically — briefly approaching $120/barrel — raising inflation concerns that pressured gold
The U.S. dollar index climbed as high as 0.7%, creating headwinds for precious metals
Despite the decline, gold maintains its position above $5,000/oz with an approximate 18% gain year-to-date
Monday saw declines across precious metals including silver, platinum, and palladium, although silver recovered much of its losses

The yellow metal experienced a significant retreat on Monday as the ongoing U.S.-Israel conflict with Iran reached its tenth day, triggering a dramatic rise in crude oil prices and strengthening the dollar — creating a dual challenge for precious metals markets.

By mid-morning London trading hours, spot gold had decreased 1.5% to reach $5,096.51/oz. During the session’s most volatile period, the price tumbled to $5,015.23/oz, coming dangerously close to slipping beneath the psychologically important $5,000 threshold. Meanwhile, gold futures contracts declined 1.1% to settle at $5,104.04/oz.

The downturn occurred as Brent crude experienced a remarkable surge of up to 30%, momentarily approaching the $120 per barrel mark. This followed weekend military strikes by U.S. and Israeli forces targeting Iranian oil infrastructure. Tehran retaliated by launching attacks on vessels navigating the Strait of Hormuz, a critical maritime corridor responsible for approximately 20% of worldwide oil transportation.

The dramatic oil spike immediately triggered market concerns about inflationary pressures — and their potential implications for monetary policy decisions.

Inflation Fears Put Fed Back in Focus

Elevated crude oil prices ripple through the broader economy, increasing costs across multiple sectors and potentially accelerating inflation. This scenario diminishes expectations for Federal Reserve interest rate reductions — and could even increase the probability of rate increases. Gold, an asset that generates no yield, typically underperforms when interest rates are anticipated to remain elevated or rise further.

The Bloomberg Dollar Spot Index advanced 0.3% on Monday following a 1.3% gain during the previous week. A robust dollar diminishes gold’s appeal to international purchasers by making it more costly in local currency terms, compounding 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 — safe-haven demand competing with rate-driven concerns — has characterized gold’s volatile price action throughout recent weeks. The precious metal has oscillated between $5,000/oz and the record peak near $5,600/oz established in late January.

Gold experienced approximately a 2% decline during the prior week. Friday’s disappointing U.S. employment data temporarily boosted expectations for monetary easing, but the oil market explosion quickly eclipsed that optimism.

Other Metals Also Under Pressure

Silver momentarily dropped beneath the $80/oz level before staging a recovery. The white metal concluded Monday’s session down 0.9% at $83.82/oz. Platinum retreated 1.8% while palladium fell 1.7%. Copper futures declined 0.7% to finish at $12,781.0 per ton.

Notwithstanding Monday’s setback, gold has accumulated approximately 18% in gains during the current year. Sustained central bank acquisitions have provided consistent underlying support, with the People’s Bank of China extending its gold purchasing streak to sixteen consecutive months through February.

Ed Meir, analyst at Marex, noted in a Friday commentary that a rapid resolution to the military confrontation would likely undermine dollar strength and support gold prices, whereas a protracted conflict would elevate both yields and the greenback based on inflation expectations. Brent crude was most recently trading approximately 12.5% higher for the day.

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