Gold prices inched lower on Monday as the dollar firmed, while news the Strait of Hormuz is closed again pushed oil prices higher and revived inflation fears.
Spot gold was down 0.4 percent at US$4,809.71 per ounce, as of 0155 GMT, after hitting its lowest level since April 13 earlier in the session. US gold futures for June delivery fell 1 percent to US$4,829.40.
"Gold prices are lower today after the US-Iran war ceasefire that markets celebrated last week appeared to be breaking down," said Ilya Spivak, head of global macro at Tastylive.
"That has revived the now-familiar 'war trade' dynamics we've seen since the beginning of the conflict. Crude oil prices gained, which echoed into inflation expectation and drove up both yields and the US dollar."
The dollar index strengthened, making greenback-priced bullion more expensive for other currency holders. Benchmark 10-year US Treasury yields gained 0.5 percent.
Oil prices jumped and stock markets wobbled as rising tension in the Middle East kept shipping in and out of the Gulf to a bare minimum.
The US has seized an Iranian cargo ship that tried to run its blockade and Iran said it would retaliate, raising the possibility that the ceasefire between the two countries might not last for even the two days it is set to remain in force.
Tehran said it would not participate in a second round of negotiations that the US had hoped to kick off before the ceasefire expires on Tuesday.
Gold prices have fallen about 8 percent since the US and Israel launched strikes on Iran in late February, on concerns that higher energy prices could stoke inflation and keep global interest rates higher for longer.
While gold is considered an inflation hedge, higher interest rates crimp demand for the non-yielding asset.
"In the interim, we still expect gold's directional trade to take cues from broader risk sentiment, and this is highly dependent on how ceasefire talks pan out," said Christopher Wong, a strategist at OCBC.
Among other metals, spot silver fell 0.5 percent to US$80.36 per ounce, platinum was steady at US$2,103.38, and palladium was down 0.1 percent to US$1,556.45.
Reuters
