XAU/USD has fallen to around $4,000 since last weekend as the precious metal continues to hover near the psychological level after falling 14% in the second quarter, recording its worst quarterly performance since 2013.
At 9.15 am, gold was trading at $4,008, down 0.20% since it opened early Monday in Asian trading.
Escalating tensions between the United States (US) and Iran have pushed up global oil prices. This has raised concerns about inflation even though US consumer and producer inflation data previously showed signs of slowing.
The rise in oil prices is expected to make it harder to bring down inflation, reinforcing expectations that the US Federal Reserve (Fed) will keep interest rates high for an extended period.
A high interest rate environment typically reduces the appeal of gold as the metal does not offer a yield.
According to the CME FedWatch Tool, the market is now pricing in a 61.4% probability that the Fed will raise interest rates at its September meeting.
In geopolitical developments, the US reportedly launched a ninth night of strikes on Iran. Washington said the airstrikes on Sunday were in response to the first US military deaths since the new conflict erupted with Iran.
At the same time, Iranian officials said that a ceasefire between Washington and Tehran was now considered null and void. The development raises the risk of disruption to key energy supply routes in the Middle East region.
Meanwhile, airstrike sirens were reportedly heard in Bahrain after Iran launched a new wave of ballistic missiles and drones targeting several locations in Bahrain, Jordan, Kuwait and Iraq.
The protracted conflict is expected to continue to be the main driver of global market movements, including gold prices in the near term.
