Gold prices dipped on Monday, pressured by concerns that surging oil costs could stoke inflation further and prompt a more hawkish policy stance by major central banks including the US Federal Reserve, dulling the appeal of the non-yielding asset.
Spot gold fell 0.7% to $4,983.17 per ounce, as of 0944 GMT. US gold futures for April delivery fell 1.5% to $4,987.30.
"The gold market has moved its focus from looking at the implications of the Hormuz trade closure, and towards implications of longer-term inflation," said Bernard Dahdah, an analyst at Natixis.
"Higher oil prices mean higher inflation and this has repercussions on the Fed. The Fed could pivot, stop cutting rates and that puts downward pressure on gold prices."
Oil held above $100 a barrel, up more than 40% this month to its highest levels since 2022, after US-Israeli strikes on Iran prompted Tehran to halt shipments through the Strait of Hormuz.
US President Donald Trump on Sunday pressed allies to help secure the Strait of Hormuz as Iranian forces continue attacks on the vital waterway amid the US-Israeli war on Iran, now in its third week.
The Fed will meet this week for a two-day policy meeting, where it is widely expected to hold interest rates steady.
Other central banks including the European Central Bank, the Bank of England and the Bank of Japan will also meet this week, with the focus on policymakers' assessment of the Iran war on inflation, growth and future policies.
"But we expect central banks to be watchful of inflation risks without making knee-jerk policy rate hikes," UBS said in a note.
"In addition, the longer the US-Iran conflict goes on, the higher the risk of negative economic impacts, which should support hedging demand for gold."
Elsewhere, spot silver fell 2.6% to $78.46 per ounce. Spot platinum held steady at $2,024.85 and palladium slid 0.5% to $1,542.92.
