Gold prices declined sharply on Monday, pressured by a strengthening US dollar and rising Treasury yields, which diminished the metal's attractiveness as a non-yielding asset. Spot gold fell 0.7% to $4,793.98 per ounce, touching its lowest level since April 13, while US gold futures for June delivery dropped 1.4% to $4,813.60.
The decline was driven by currency and bond market dynamics. A stronger dollar index made gold more expensive for holders of other currencies, while benchmark 10-year US Treasury yields rose by 0.5%, reducing the appeal of assets that do not offer interest.
Geopolitical tensions in the Middle East added a layer of complexity. Market sentiment shifted after signs emerged that the ceasefire between the US and Iran may not hold, following a reported US seizure of an Iranian cargo ship and Iran's warning of retaliation. These developments heightened uncertainty, pushing oil prices higher and reigniting inflation concerns, which paradoxically did not support gold prices as higher interest rate expectations took precedence.
Physical demand also showed weakness. In India, one of the world's largest gold consumers, demand remained subdued during a key buying festival as high prices discouraged jewellery purchases. This offset a modest rise in investment demand.
The broader precious metals complex followed gold lower. Spot silver dropped 0.9% to $80.04 per ounce, platinum fell 0.5% to $2,093.56, while palladium remained steady at $1,558.60. Analysts note that gold's role as a long-term inflation hedge and portfolio diversifier remains intact, but short-term movements are being dictated by monetary policy expectations and dollar strength.
