Gold prices declined on Tuesday as a stronger dollar reduced investor demand. The fall came despite rising geopolitical tensions in the Middle East.
Spot gold dropped 1.4% to $5,252.05 per ounce by 0931 GMT. U.S. gold futures for April delivery fell 0.9% to $5,263.80. Analysts said the stronger dollar played a key role in the decline.
The U.S. currency rose to a more than one-month high. Firm demand and cautious market sentiment supported the dollar. A stronger currency often makes gold more expensive for foreign buyers.
Gold is priced in dollar terms. When the dollar gains strength, it raises the cost for investors using other currencies. This can reduce global demand for the metal.
Thu Lan Nguyen of Commerzbank said markets are now focusing on inflation risks. She noted that the ongoing U.S.-Israeli air war against Iran has increased uncertainty. Rising inflation expectations may lead to higher interest rates.
Gold usually performs better when interest rates are low. It is a non-yielding asset, meaning it does not offer regular returns. Higher interest rates can reduce its appeal.
Traders expect the U.S. Federal Reserve to hold interest rates steady at its next meeting on March 18. According to the CME Group FedWatch tool, the chances of a rate hold in June have risen above 60%.
Meanwhile, global oil and gas shipping rates surged. An official from Iran’s Revolutionary Guards said the Strait of Hormuz is closed to marine traffic. He warned that Iran would target ships attempting to pass.
Israeli Prime Minister Benjamin Netanyahu said the conflict with Iran could take time. However, he stated it would not last for years.
Despite the recent fall, many analysts remain positive on gold. BMI, part of Fitch Solutions, said prices could rise above $5,600 per ounce. This could happen if tensions do not ease.
Other precious metals also saw sharp losses. Silver fell 6.5% to $83.63 per ounce. Platinum declined 7.5% to $2,131.30. Palladium dropped 4.1% to $1,694.75.
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Investors continue to monitor global developments closely as currency movements and geopolitical risks shape market trends.
