Washington: Gold fell on Tuesday as fresh US attacks in Iran pushed oil prices higher, fuelling concerns about inflation and the prospect of higher-for-longer interest rates.
Spot gold was down 0.6% at $4,542.20 per ounce as of 0401 GMT. US gold futures for June delivery rose 0.4% to $4,542.80.
Iran's top negotiator and its foreign minister were in Doha for talks with Qatar's prime minister on a potential deal with the US to end the three-month-old war, an official briefed on the visit said on Monday, after Washington and Tehran played down hopes of an imminent breakthrough.
Even as the talks proceeded, US forces on Monday conducted strikes in southern Iran against targets including boats attempting to lay mines and missile launch sites, in what it described as defensive actions.
“Even though we have a peace deal that is being finalised between the US and Iran, the damage that has been done to Middle East oil production facilities could prevent a rapid normalisation of oil flows to the rest of the world,” said Kelvin Wong, a senior market analyst at OANDA.
“The market has started to price in this situation, showing very high odds of an interest rate hike later this year.”
Brent crude futures rose 2% in early Asian trade on Tuesday, as tensions between the US and Iran persisted.
Elevated crude oil prices can fuel inflation and keep interest rates higher for longer. While gold is seen as a hedge against inflation, higher rates tend to weigh on the non-yielding metal.
Markets are pricing in a US Federal Reserve rate hike before year-end, with a 56% chance of a move by December, according to CME Group’s FedWatch tool.
Spot silver fell 1.6% to $76.84 per ounce, platinum lost 0.8% to $1,952.56, and palladium slid 1.2% to $1,381.27.