Gold prices fell for a second straight session as traders weighed cooling expectations for Federal Reserve interest rate cuts against rising oil prices driven by conflict in the Middle East.

On March 12, spot gold dropped as much as 1% during early trading, following a 0.3% decline in the previous session. Prior to the outbreak of hostilities involving Iran, core inflation in the United States had shown moderation early this year, but renewed forward-looking inflation concerns have diminished the likelihood of near-term Fed rate cuts. The Bloomberg Dollar Spot Index climbed as much as 0.3%, while the European Union warned that inflation in the bloc could exceed 3% this year.

According to Hebe Chen, an analyst at Vantage Markets in Melbourne, the pullback in gold "appears more like a pause than a surrender." Rising expectations for persistent inflation pressures have bolstered the U.S. dollar and delayed the timeline for anticipated Fed policy easing. "In a market that has room for only one safe-haven asset, gold is temporarily being sidelined," Chen noted.

Despite the recent decline, gold has still gained nearly 20% year-to-date, supported by its traditional role as a safe-haven asset during periods of geopolitical instability. However, since the outbreak of hostilities involving Iran on February 28, the price of gold has shown increased volatility, with its upward momentum stalling. "The safe-haven trade is not over; it's just taking a brief pause," Chen added.

As of 9:06 a.m. Singapore time, spot gold was down 0.4% at $5,153.14 per ounce, while silver declined 0.2% to $85.55 per ounce. The Bloomberg Dollar Spot Index advanced 0.2%.