Gold prices fall as Iran war escalation sparks rally in oil, dollar

Investing.com-- Gold prices fell in early Asian trade on Monday as a rapidly escalating war between the U.S., Israel, and Iran sparked outsized flows into oil and the dollar. 

But bullion prices remained above $5,000 an ounce, staying relatively well-bid as increasing haven demand in the wake of the war still spurred flows into gold. 

Spot gold fell 2% to $5,064.71/oz by 18:54 ET (23:54 GMT), while gold futures fell 1.6% to $5,073.21/oz. 

While the yellow metal has benefited from increased haven demand with the onset of the U.S.-Israel war with Iran, its gains have been tempered by concerns that the inflationary effects of the war could elicit a more hawkish stance from major global central banks.

This saw the dollar outpace gold over the past week, while oil prices outpaced commodity markets as the Iran war pointed to increased supply disruptions in crude markets. 

Both the dollar and oil surged on Monday after U.S. and Israeli strikes on Iran’s oil facilities marked a potential escalation in the war. The dollar index jumped 0.6%, while Brent oil rallied as much as 20% and blew past $100 a barrel. 

Iran over the weekend was seen attacking ships in the Strait of Hormuz, essentially blocking the shipping lane that accounts for roughly 20% of the world’s oil supplies. 

Gold had fallen some 2% last week, as the yellow metal continued to flit between $5,000/oz and a near $5,600/oz record high hit in late-January. The metal has since logged wild swings amid heightened speculative activity and growing uncertainty over the path of interest rates. 

Substantially softer than expected U.S. nonfarm payrolls data on Friday did spur some hopes for lower interest rates, although focus is now on the inflationary effects of high oil prices. 

Other precious metal prices also broadly fell on Monday. Spot silver fell 2.5% to $82.12270/oz, while spot platinum slid 4.2% to $2,050.29/oz.