Gold prices fell 2% on Monday as heightened U.S.-Iran tensions boosted the dollar and reinforced inflation concerns that kept expectations of higher interest rates alive.
Spot gold was down 2.6% at $4,524.40 per ounce at 4:15 p.m. ET, while U.S. gold futures for June delivery settled 2.4% lower at $4,533.30.
"The latest news clearly didn't give the market confidence that everything is going to be okay and again raised the specter of inflation issues, along with fairly hawkish signals to the market on interest rates," said Bart Melek, global head of commodity strategy at TD Securities.
Iran hit several ships in the Strait of Hormuz and set a UAE oil port ablaze, as President Donald Trump's attempt to use the U.S. Navy to free up shipping provoked the war's biggest escalation since a ceasefire was declared four weeks ago.
The U.S. dollar firmed and Brent prices jumped more than 5%. A stronger U.S. currency makes dollar-priced metals more expensive for holders of other currencies.
Meanwhile, soaring energy prices have intensified inflation fears, strengthening bets that central banks will keep interest rates higher for longer.
Barclays joined a growing list of brokerages to bet on no policy easing from the U.S. Federal Reserve this year. Last week, the Fed left rates unchanged in its most divided decision since 1992 on deepening concerns about higher energy prices percolating through the economy.
Key data due this week include U.S. job openings, the ADP employment report and the April payrolls report.
Even as gold serves as a hedge against inflation and geopolitical uncertainty, the metal loses appeal in a high-rate environment as it offers no yield.
"I see strong support levels around $4,200 for gold. I do think there are broader issues later in the year that could support prices. However, uncertainty and possible rate hikes could push some traders to exit positions in the near term," Melek said.
Spot silver fell 3.5% to $72.67, platinum lost 2.2% to $1,946.15, and palladium shed 3% to $1,478.74.