Gold prices dropped to a nearly one-week low on Monday, hit by a strengthening dollar and rising oil prices. The collapse of U.S.-Iran peace talks sparked fears of persistent inflation, leading investors to scale back expectations for Federal Reserve interest rate cuts in 2026. Spot gold declined 0.6% to $4,718.98 per ounce, while June gold futures saw a 1% decrease, settling at $4,742.
The geopolitical situation worsened as oil prices surpassed $100 per barrel. This spike followed reports that the U.S. Navy is preparing a blockade of the Strait of Hormuz after negotiations failed. Iran’s Revolutionary Guards have countered with warnings that any military vessels approaching the area will be met with a decisive response.
Analysts noted that the unwinding of ceasefire hopes has redirected market attention toward inflationary pressures. Tim Waterer of KCM Trade highlighted that triple-digit oil prices often lead to expectations of higher interest rates to control inflation. Since the onset of the conflict on February 28, spot gold has already depreciated by more than 11%.
While gold is traditionally viewed as an inflation hedge, the prospect of sustained high interest rates makes the non-yielding asset less attractive. Furthermore, the 0.4% rise in the dollar has made bullion more expensive for international buyers. In other precious metals, silver and platinum saw declines of 2.2% and 0.5% respectively, whereas palladium managed a 1% gain.
Click here for more on Finance and Investing
