Gold fell on Monday to its lowest in nearly two weeks after US Federal Reserve Chair Kevin Warsh signaled that interest rate hikes may be needed to ease price pressures, while escalating Middle East tensions fueled inflation fears.
Spot gold fell 0.8% to $4,417.04 per ounce by 0406 GMT, hitting its weakest level since August 19. Prices dropped more than 3% on Friday.
US gold futures declined 1.4% to $4,466.80.
"Gold is still licking its wounds after the hawkish tone struck by Warsh at Jackson Hole. US military action in Iran has put upward pressure on oil prices, and this has added to gold’s woes from an inflation standpoint," said Tim Waterer, chief market analyst at KCM Trade.
Though viewed as a hedge against inflation, gold typically loses appeal in a rising interest rate environment as it does not yield interest.
The Fed will "have work to do" if policymakers don't get the confidence they need that inflation is heading down to 2%, Warsh said on Friday at the Jackson Hole economic symposium, coming closer than he has to acknowledging rate hikes may be needed.
Markets currently see a 60% chance of a Fed rate hike in September, according to the CME FedWatch tool.
Iran's energy hub of Kharg Island is being blown to smithereens, US President Donald Trump said on social media, after forces hit two rocket launchers on another island in the first known American strikes on Iran since late July. Oil prices were up more than 2%.
A series of US labor market reports is due this week, including job openings, the ADP employment report, weekly jobless claims and nonfarm payrolls data.
"NFP has the potential to either extend gold’s post-Jackson Hole softness or provide the catalyst for a short-covering bounce," Waterer said.
Spot silver fell 0.4% to $66.10, platinum declined 1.3% to $1,797.03 and palladium slipped 2.5% to $1,386.96.
BMI said silver prices were likely to stay near current levels, supported by steady investment demand and constrained mine supply, while easing physical tightness and softer demand would limit further gains.
