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Gold prices fell by more than 1%, on Monday, as oil prices rose and concerns about inflation increased, which reinforced expectations that the US Federal Reserve will raise interest rates again.
By 01:17 GMT, gold in spot transactions dropped 1.5% to $4223.95 per ounce, and US gold futures contracts fell 1.5% to $4257.90.
Tim Waterer, chief market analyst at KCM Trade, said that the rise in bond yields along with rising oil prices puts pressure on gold, adding that rising oil prices keep inflation at the forefront of investors' concerns.
Oil prices rose by more than 1%, on Monday, amid mixed signals about oil flows, while Iran insists that diplomacy is the way to resolve its dispute with the United States and Israel, after US President Donald Trump rejected an Iranian proposal to reopen the Strait of Hormuz and stop the fighting.
The Federal Reserve raised interest rates earlier this month by a quarter percentage point to a range of 3.75% to 4%.
According to CME's FedWatch tool, traders expect a 66% chance of a US interest rate hike in October.
Rising energy prices increase the costs of various sectors of the economy, which may fuel inflation. Although gold is seen as a hedge against inflation, rising interest rates increase the cost of holding it, as it is an asset that does not generate a return.
Investors are awaiting several data on the US labor market and inflation this week, including job openings, the employment report from ADP, the personal consumption expenditure price index, and non-farm payroll data.
Waterer said that stronger-than-expected inflation or employment data would keep upward pressure on bond yields and increase pressure on gold.
As for other precious metals, silver in spot transactions fell 2.6% to $62.64 per ounce, platinum 2.1% to $1741.45, and palladium 2.1% to $1239.95.
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