Gold traded slightly lower during Monday's Asian session but remained above the key US$4,000 an ounce level as investors balanced safe-haven demand from escalating Middle East tensions against a stronger United States dollar and rising interest rate expectations.
By 4:30 pm AEST (6:30 am GMT), spot gold was down 0.2% at US$4,004.83 an ounce.
The precious metal has stabilised after recording its biggest weekly decline in six weeks, although gains have been capped by continued strength in the U.S. dollar, which has also benefited from heightened geopolitical uncertainty.
The conflict between the United States and Iran entered its tenth day of renewed escalation following a collapse of the ceasefire, reigniting the rally in oil prices and reviving concerns that higher energy costs could fuel inflation.
US Central Command (CENTCOM) said on Sunday in a post on X: "The strikes will continue degrading Iranian military capabilities used to attack commercial vessels and civilian mariners transiting the Strait of Hormuz."
The latest military operations followed the deaths of a U.S. service member in Iraq on Saturday and two American troops in Jordan on Friday.
In today's trade so far, crude oil prices rose more than 2%, reinforcing concerns that higher oil prices could delay progress on inflation and strengthen the case for further monetary tightening by the U.S. Federal Reserve.
Markets continue to price in at least two Fed interest rate increases this year, with the first potentially arriving as early as September, according to the CME Group FedWatch Tool.
That outlook has helped keep the U.S. dollar resilient, limiting demand for non-yielding assets such as gold, which typically performs better in a lower interest rate environment.
