Gold slips 0.5% as dollar strengthens amid US-Iran tensions

Gold prices fell on Monday to near their lowest levels in two weeks, as investor expectations grew for a US Federal Reserve interest rate hike following hawkish remarks from Chair Kevin Warsh, alongside rising oil prices and mounting inflation concerns.

Spot gold dropped 0.5% to $4,429.32 an ounce by 11:45 a.m. Eastern Time, after earlier touching its lowest level since August 19.

Despite the decline, the precious metal is on track for its best monthly performance since January, with prices up about 9.6% since the start of August.

Daniel Pavilonis, senior market strategist at Stone X, said: "The biggest factor now is rising interest rates and higher inflation expectations, driven by energy and falling oil inventories."

He added: "US yields continue to rise, and the dollar keeps strengthening. I think that puts gold in a tough spot."

Gold also came under additional pressure as crude oil prices jumped more than 3% on Monday, after the United States launched a strike on an Iranian island in the Strait of Hormuz, with Tehran saying it had responded, escalating a conflict now in its sixth month.

The US dollar held near its highest level in about two weeks, though a slight pullback during trading helped limit further losses in gold prices.

Gold had fallen more than 3% on Friday, marking its biggest daily drop since June 10, after Federal Reserve Chair Kevin Warsh indicated at the Jackson Hole symposium that policymakers may need to take further action if inflation does not move back toward the central bank's 2% target.

Traders raised their bets on a September rate hike to about 64%, up from around 36% before Warsh's comments, according to the CME FedWatch tool.

Markets are now focused on the upcoming ADP employment report and nonfarm payrolls data due later this week, seeking fresh signals on the economy and the future path of interest rates.

In other metals markets, spot silver slipped 0.2% to $66.23 an ounce, but is up about 15% in August after hitting its highest level since mid-June on Friday.

Platinum fell 1.7% to $1,788.03 an ounce, while palladium dropped more than 4% to $1,362.78, with both metals on track for their biggest monthly gains since December.