Gold Slumps Amid Dollar Surge and Iran-US Tensions

Gold prices plummeted to their lowest in over three weeks due to a strengthening US dollar and growing inflation risks. This comes as tensions between the US and Iran escalate, with the two countries engaging in the biggest exchange of fire since July.

Nikos Tzabouras, a senior market analyst at Tradu.com, attributed the decline to 'lingering geopolitical uncertainty' pushing oil prices higher and sustaining inflationary risks. He noted that this is putting pressure on the Federal Reserve to raise interest rates, boosting the dollar and compounding gold's headwinds.

The US dollar hit a two-week high as investors sought safe-haven assets due to concerns about the economic impact of the energy shock. This made dollar-priced bullion more expensive for buyers holding other currencies.

Traders are now pricing in a 68% chance of an interest rate hike at the central bank's policy meeting this month, according to the CME FedWatch Tool. However, gold is typically seen as an inflation hedge, and higher interest rates tend to diminish its appeal to investors.