Spot gold was almost flat at about $4,379.74 an ounce in early trade, while US gold futures for December delivery slipped 0.1 per cent to $4,419.40. The metal had climbed to a one-week high on Friday after oil prices eased and concerns over inflation moderated.
Trading remained sensitive to developments across the Middle East, where conflict involving the United States and Iran and attacks affecting regional energy infrastructure have kept investors focused on the risk of renewed oil-price pressure. Gold typically attracts safe-haven demand during periods of geopolitical stress, but higher energy costs can also reinforce inflation expectations and support tighter monetary policy, creating an offsetting headwind for bullion.
Oil prices fell on Monday despite continuing regional tensions. Brent crude was down by roughly 2 per cent in Asian trading, hovering near $102 a barrel, as traders assessed improving crude shipments from the Gulf and efforts to restore disrupted Saudi export capacity.
The retreat in oil helped ease some inflation anxiety, although US bond markets continued to reflect expectations of further monetary tightening. Two-year Treasury yields had risen sharply after the Federal Reserve increased its benchmark rate last week, while traders continued to price a meaningful chance of another increase at the central bank’s October meeting.
The Federal Reserve raised the federal funds target range by 25 basis points on September 16 to 3.75 per cent to 4 per cent, its first increase since 2023. The move followed persistent inflation pressures and reinforced the prospect that borrowing costs may remain restrictive.
Higher interest rates tend to weigh on gold because the metal pays no interest, raising the opportunity cost of holding it compared with interest-bearing assets. That pressure has been partly countered by lower long-term yields and continuing demand for protection against geopolitical and inflation risks.
Gold had gained more than 1 per cent on Friday, with spot prices ending near $4,390 an ounce as falling crude prices reduced fears that an energy shock would force the Federal Reserve into a more aggressive tightening path. The metal also recorded its first weekly gain in four weeks.
The US dollar remained firm on Monday after strengthening to a more than seven-week high last week. A stronger dollar generally makes gold more expensive for buyers using other currencies and can limit upside in bullion prices.
Investors are also monitoring diplomatic activity around the United Nations General Assembly in New York, where the Middle East conflict, energy security and the US-Iran confrontation are expected to feature prominently. Any shift in the risk of further escalation could quickly feed through to oil, inflation expectations, Treasury yields and precious metals.
Shipping conditions through the Strait of Hormuz remained a key focus. Vessel traffic has fallen sharply compared with levels before the conflict, although crude exports from Gulf producers have continued. Saudi Arabia’s crude exports have recovered from August lows, helping reduce fears of an immediate supply squeeze.
That improvement in flows has contributed to the decline in oil prices, but traders remain cautious because shipping disruptions and attacks on infrastructure continue to create the potential for sudden changes in energy supply.
Other precious metals gained in early trade. Spot silver rose 0.8 per cent to $66.76 an ounce, platinum advanced 0.2 per cent to $1,804.33 and palladium added 0.7 per cent to $1,311.65.
The dollar index was little changed near 100.23, underscoring the competing forces facing bullion: a firm US currency and higher short-term yields on one side, and haven demand linked to geopolitical uncertainty on the other. Market pricing indicated roughly a 55 per cent probability of another Federal Reserve rate increase in October.
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