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Gold falls as Iran threatens to support the dollar, keeping inflation fears in mind

Prices of gold fell on Monday, after the?Iran claimed it had hit a 'U.S. Gold?prices fell on Monday after?Iran said it had struck a u.s.

By 8:51 am, spot gold had fallen 0.9% to $4,572.40 an ounce. ET (1251 GMT). U.S. Gold futures dropped 1.3% to $4.583.70.

Gold prices are down again, due to the Strait of Hormuz issues. "The latest 'news' clearly did not give the market confidence in the future and raised the specter inflation issues along with fairly hawkish interest rate signals," said TD Securities global head of commodity strategies Bart Melek. According to Axios, Iran claimed that it forced a U.S. ship to turn around?from entering Strait of Hormuz. However, a U.S. official has denied the report.

After the news, both the U.S. Dollar and oil prices rose. The dollar price of metals increases when the U.S. dollar strengthens.

The soaring prices of energy have heightened inflation fears and boosted bets on central banks keeping interest rates high for longer.

Barclays has joined the growing list of 'brokerages who bet against any policy easing by the U.S. Federal Reserve in this year. The Fed's most divided decision since 1992, which was made last week, left rates unchanged. This was due to the growing concern about the rising energy prices that are affecting the economy.

This week, key data includes the ADP Employment Report and the April Payrolls report.

Gold is a hedge against inflation, geopolitical unrest and other risks. However, it loses its appeal when rates are high because the metal offers no return.

"I see strong levels of support around $4,200 gold. I think that there will be broader issues in the future which could support gold prices. Melek stated that traders could be pushed to sell positions due to uncertainty and possible rate increases.

Silver fell by 1.9% at $73.94, while platinum dropped 0.9% to $1971.05 and palladium lost 2.4% to $1488.28. (Reporting and editing by Shilpa Majumdar in Bengaluru, Ashitha Shivaprasad from Bengaluru)

(source: Reuters)