Gold slips as invetsors focus on Middle East, rate outlook

Gold prices fell on Monday as market participants weighed developments in the Middle East and their implications for inflation and interest rates. Iran and the US exchanged new threats, with President Donald Trump warning Iran would fail economically or face its leadership being wiped out if it didn't make a deal, and the Iranian military saying it would retaliate harshly to any fresh attack. Spot gold fell 0.5% to $4,354.30 per ounce by 0648 GMT after hitting a one-week high on Friday. US gold futures were down 0.8% at $4,391.50. "The focus remains on geopolitics, oil and the reaction in bond yields. For gold to gain meaningful upside traction, a clear move lower in oil and/or bond yields is likely required," said Tim Waterer, chief market analyst at KCM Trade. Gold may trade in a roughly $4,200 to $4,580 range in the near term, Waterer said. The odds of a new global rate-tightening cycleincreased as some of the world's top central banks raised rates and signalled more may be needed to tame inflation fuelled by the Iran war. The Bank of Japan became the latest big central bank to tighten on Friday, following rate increases by the Federal Reserve earlier that week and the European Central Bank the week before. Though gold is seen as an inflation hedge, rising rates tend to curb demand by making interest-bearing assets more attractive. Analysts at Standard Chartered said in a note that gold continues to find firm support from official-sector demand and structural drivers remain in place to lift prices, albeit at a slower pace. Oil prices fell on hopes of a diplomatic solution to the conflict amid a UN meet this week and as investors eyed a partial recovery in shipments from Saudi Arabia. Among other metals, spot silver lost 0.3% to $66.04, platinum fell 0.2% to $1,800.53 while palladium added 0.8% to $1,313.15.