Gold falls due to dollar strength amid tensions between the US, Israel, and Iran

The international gold price registered a drop at the start of the week in a context marked by the strengthening of the US dollar and growing geopolitical uncertainty in the Middle East. Tensions arising from the conflict between the United States, Israel, and Iran have generated inflationary concerns in the markets, which has reduced expectations of an interest rate cut in the United States in the short term.

Against this backdrop, spot gold fell by about 1.21%, trading at $5,109.39 per ounce during the session. In the early trading hours, the precious metal lost more than 2%, reflecting the volatility generated by movements in the financial markets. Meanwhile, U.S. gold futures for April delivery were down nearly 0.81% (TP3T), trading around $5,118.20.

Analysts point out that initial drops in gold during times of tension are not unusual. Giovanni Staunovo, an analyst at UBS, explained that in episodes of financial volatility, investors tend to liquidate positions in liquid assets, including gold, to cover immediate liquidity needs.

At the same time, international financial markets experienced strong movements. Asian stock markets registered declines amid increasing concerns about a possible inflationary rebound driven by rising oil prices, which could put pressure on global costs and delay potential interest rate cuts.

Strong dollar pressures gold

The appreciation of the US dollar, which reached levels not seen in almost three months, also contributed to the fall of the precious metal. A stronger dollar makes gold more expensive for investors operating with other currencies, reducing international demand for this asset.

According to Staunovo, the rise in oil prices is being interpreted by the market as a signal of higher inflation, which could lead central banks to maintain a more restrictive monetary policy for longer.

Oil and inflation set the stage

Oil prices rose sharply throughout the day, climbing more than 15% and reaching levels not seen since mid-2022. The surge followed supply cuts by some producers and fears of disruptions to maritime transport stemming from the conflict in the region.

In parallel, the political landscape in Iran also captured the markets' attention after Mojtaba Khamenei was named as the successor to Ali Khamenei as the country's supreme leader.

Federal Reserve Expectations

Investors are closely watching for signals from the U.S. Federal Reserve. Currently, the market anticipates that the monetary authority will keep interest rates unchanged at its next meeting scheduled for March 18.

According to estimates based on the CME Group’s FedWatch tool, the probability that rates will remain unchanged through June has risen significantly, exceeding 51.1%, compared with levels below 43.1% recorded before the conflict began.

The increase in U.S. 10-year Treasury yields, which reached their highest level in a month, is also putting pressure on gold. As it offers no yield of its own, the precious metal tends to lose attractiveness compared to interest-bearing assets.

Other precious metals are also retreating.

The downward trend spread to other precious metals. Silver posted a slight decline of about 0.31%, trading around $84.07 per ounce, after losing more than 5% in early trading.

Meanwhile, platinum fell by approximately 11 cents to $2,113.97, while palladium dropped by about 1.31 cents, settling at around $1,604.09 per ounce.