By: Economy Middle east

Gold prices saw a decline exceeding 3 percent on Monday, reaching a level not seen in nearly four months as intensifying conflict in the Middle East fueled concerns regarding inflation and the potential for increased global interest rates. 

Spot gold had decreased by 3.08 percent or $138.40, bringing the price to $4,353.35. During an earlier session, spot gold fell 2.7 percent to $4,366.94 per ounce, which marked a ninth consecutive session of losses. 

The precious metal hit its lowest point since January 2 on that day, following a loss of more than 10 percent during the previous week. Additionally, U.S. gold futures for April delivery saw a reduction of 4.40 percent to $4,406.99.

Within the UAE, gold rates underwent a sharp decrease by 9:13 am Dubai time. The price of 24K gold fell AED15.25 to AED526.25, while 22K gold dropped AED14.25 to AED487.25. Furthermore, 21K gold decreased AED13.50 to AED467.25, 18k gold declined AED11.75 to AED400.50, and 14k gold fell AED9.00 to AED312.50.

Geopolitical and economic factors

Meanwhile, Iran stated on Sunday that it would escalate in retaliation if the U.S. follows through with the threat to strike the electricity grid of Iran within 48 hours. Asian shares declined and oil prices remained significantly above $110 a barrel as investors considered U.S. and Iranian threats directed at energy facilities. 

The closure of the Strait of Hormuz maintained elevated crude prices, which intensified inflation fears by increasing the costs of transport and manufacturing. Although rising inflation generally improves the appeal of gold as a hedge, high interest rates limit demand for the non-yielding asset. 

Market pricing for a U.S. Federal Reserve rate hike this year has risen significantly and is currently viewed as much more probable than a rate cut.  According to the CME FedWatch tool, rate futures are pricing in approximately a 32 percent chance of a rate hike by December. 

In other precious metals, spot silver decreased 2.32 percent to $66.29 per ounce, spot platinum fell 3.22 percent to $1,862.00, and palladium declined 0.43 percent at $1,386.00.