Spot gold fell 0.4% at $4,998.69 per ounce, after hitting its lowest level since February 19 earlier in the session. U.S. gold futures for April delivery fell 1.1% to $5,004.90.
The dollar pulled back from a 10-month peak, making dollar-priced bullion more attractive to holders of other currencies.
“With higher oil prices comes higher inflation. If we do have higher inflation, central banks are not going to be as motivated as they were six months ago to cut rates, which is a negative for gold prices,” said Bob Haberkorn, senior market strategist at RJO Futures.
“But I’m still very bullish on gold, given what’s happening around the world. A lot of money is still on the sidelines waiting to enter this market, and I’m still anticipating $6,000/oz gold.”
Gold, typically an inflation and uncertainty hedge, tends to underperform in high-rate environments because the opportunity cost of holding a non-yielding asset rises.
Oil prices fell on Monday but were up more than 60% so far this year. The U.S.-Israeli war on Iran is now entering its third week, with no clear end in sight, shutting down the Strait of Hormuz through which 20% of the world’s oil and liquefied natural gas flow.
Also on the market’s radar this week are the U.S. Producer Price Index (PPI) data, the Federal Reserve’s policy decision, Chair Jerome Powell’s speech, and weekly U.S. jobless claims numbers.
The Fed is expected to hold rates steady at its meeting on Tuesday and Wednesday. Data since the last meeting showed little change in the underlying outlook, and the Fed is transitioning to a new leader, Kevin Warsh, nominated by Trump.