Gold prices declined on Monday as the US dollar strengthened, with investors assessing the potential impact of geopolitical developments on inflation and monetary policy. Markets were also monitoring US President Donald Trump’s announcement of an energy ceasefire between Russia and Ukraine alongside renewed attacks in the Middle East.
At 05:01 ET (09:01 GMT), spot gold (XAU/USD) fell 0.5% to $4,174.23 per ounce, while gold futures declined 0.4% to $4,198.05.
Other precious metals also weakened. Spot silver (XAG/USD) dropped 0.5% to $60.5075 per ounce, platinum (XPT/USD) lost 0.3% to $1,684.41, and palladium (XPD/USD) declined 0.2% to $1,150.30. Palladium futures, however, edged higher to $1,150.75.
The US dollar index gained 0.1% to 102.31, making dollar-denominated bullion more expensive for buyers using other currencies. Gold had advanced 1.3% during the previous week.
Russia-Ukraine Energy Ceasefire Announcement Draws Attention
Trump said an energy ceasefire between Russia and Ukraine had taken immediate effect, raising expectations that disruptions to fuel production and exports could ease.
The US president had previously urged Ukrainian President Volodymyr Zelenskyy to stop attacks on Russian oil refineries. He also said Moscow had agreed to release additional diesel supplies into international markets.
However, the ceasefire had not been independently confirmed by both governments, leaving uncertainty over whether the proposed arrangement would lead to a reduction in attacks on energy infrastructure.
Meanwhile, renewed violence in the Middle East continued to raise concerns about the stability of regional energy supplies.
King Khalid International Airport in Riyadh, Saudi Arabia, was reportedly attacked by Houthi forces on Sunday, following a strike on Saturday that killed 12 people and injured more than 300.
The Saturday incident was reported as the deadliest attack in Saudi Arabia since the conflict involving Iran began in late February.
The Houthis said their operations were in response to what they described as Saudi aggression, including an attack on the airport in Sanaa, Yemen’s capital.
The incidents have increased concerns about the possibility of further disruption to regional energy production and transportation.
Despite a recent decline in crude oil prices, gold has lost approximately one-fifth of its value since the US-Iran conflict began in late February.
Higher energy costs can contribute to broader inflation, potentially prompting central banks to maintain or increase interest rates.
Gold does not generate interest income, meaning higher yields on bonds and other financial assets can reduce its relative attractiveness to investors.
ETF Inflows and Central Bank Buying Provide Support
Analysts at ANZ identified stronger investment demand as a factor supporting gold prices despite concerns about inflation and interest rates.
According to Bloomberg data cited by the bank, inflows into exchange-traded funds backed by gold have reached their highest level in four years.
ANZ attributed the increased interest partly to concerns about government finances, including rising debt-servicing costs and changes in money supply.
Central bank purchases have also continued to contribute to demand.
The People’s Bank of China increased its gold holdings by 740,000 ounces in September, marking its 23rd consecutive month of purchases.
However, ANZ warned that the possibility of further monetary tightening by the US Federal Reserve could limit gains in bullion prices if inflation remains elevated.
The prospect of higher interest rates remains an important consideration for investors, particularly as geopolitical developments continue to influence energy prices.
Market participants will therefore monitor the proposed Russia-Ukraine energy ceasefire, developments in the Middle East and forthcoming inflation indicators for signals about the direction of monetary policy and precious metal prices.
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