Gold fell about 2% on Monday, as a stronger U.S. dollar weighed on the greenback-priced bullion, while higher energy costs fuelled inflation concerns and further dimmed the prospects for near‑term reductions in interest rates.
Spot gold fell 2.1% to $5,062.61 per ounce; spot silver dropped 4.46% to $80.61 per ounce.
Precious metal shares slid in overnight trading. ProShares Ultra Silver, Sibanye down around 8%; Hycroft Mining, Fortuna Silver Mines down over 7%; Endeavour Silver, Silvercorp Metals down over 6%.
The dollar rose to a more-than-three-month high, making bullion more expensive for holders of other currencies.
The U.S. 10‑year Treasury yields climbed to a one-month high, raising the cost of holding non‑yielding gold.
"Gold is on the back foot today despite the market tumult, with triple-digit oil prices boosting the dollar on inflation fears and scaled back rate-cutting expectations," said Tim Waterer, KCM Trade chief market analyst.
Crude oil prices surged more than 20% to above $110 per barrel as the expanding U.S.-Israeli war with Iran led some major Middle Eastern oil producers to cut supplies amid fears of prolonged disruption to shipping through the Strait of Hormuz.
"Much of gold's price rise over the last 12 months was predicated on a dovish outlook for U.S. interest rates, but given the inflation risk presented by $100 per barrel oil, rate cuts are no longer a given and gold has repriced accordingly," Waterer said.
Investors expect the U.S. Federal Reserve to keep interest rates steady at the end of its two-day meeting on March 18, as per CME Group's FedWatch tool. The odds of a June hold, which were below 43% last week, climbed to more than 51%.
Bullion tends to thrive in a low-interest-rate environment as it is a non-yielding asset.
Meanwhile, raising geopolitical tensions in the Middle East, Iran on Monday named Mojtaba Khamenei to succeed his father, Ali Khamenei, as supreme leader, signalling that hardliners remain firmly in charge.
Spot silver dropped 2.2% to $82.50 per ounce. Spot platinum fell 2.8% to $2,076.07, and palladium was down 1.2% at $1,605.12.