Gold prices fell on Thursday, weighed down by increased expectations of US Federal Reserve rate hikes this year as elevated oil prices stoked inflation worries, with investors awaiting clarity on Middle East de-escalation efforts.
Spot gold fell 1.2% to $4,451.47 per ounce by 0811 GMT. US gold futures for April delivery lost 2.3% to $4,448.
"You're seeing an acceleration of the idea that... this war will mean inflation and inflation will mean a response from central banks, which will mean higher interest rates," said Ilya Spivak, head of global macro at Tastylive.
Brent crude futures climbed back above $100 a barrel on concerns that protracted fighting in the Middle East will further disrupt energy flows.
Higher crude prices tend to fuel inflation, and while rising inflation typically boosts gold's appeal as a hedge, high interest rates weigh on demand for the non-yielding asset.
Markets see a 37% chance of a US rate hike by December this year with almost no chance of a cut now, according to CME Group's FedWatch Tool. Before the conflict, markets were expecting at least two rate cuts.
US President Donald Trump said Iran was desperate to make a deal to end nearly four weeks of fighting, contradicting the Iranian foreign minister who said his country was reviewing a US proposal but had no intention of holding talks to wind down the conflict.
"In the next 24 to 48 hours, (gold prices) will just be about reacting to headlines about negotiations," said Kyle Rodda, a senior financial market analyst at Capital.com.
"The really big moves will happen probably at the start of next week when it becomes clearer whether the US launches a ground invasion in Iran over the weekend."
Trump has vowed to hit Iran harder if Tehran fails to accept that the country has been "defeated militarily", White House press secretary Karoline Leavitt said on Wednesday.
Spot silver fell 2.7% to $69.36 per ounce. Spot platinum was down 2.3% at $1,874.90, while palladium dropped 2.5% to $1,387.53.
