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Gold drops on stronger dollar amid renewed US/Iran tensions

The dollar strengthened on Monday, and gold prices fell. Meanwhile, news that the "Strait of Hormuz" is once again closed pushed up oil prices, reigniting inflation concerns.

As of 0537 GMT spot gold was down by 0.7% to $4,794.21 an ounce after reaching its lowest level since April 13 during the earlier session. U.S. Gold Futures for June Delivery fell 1.3% to $ 4,813.70.

Ilya Spivak is the head of global macro at Tastylive. He said that gold prices were lower today because the U.S. - Iran war ceasefire, which markets celebrated last Friday, appeared to have broken down.

"This has brought back the familiar 'war-trade' dynamics that we have seen since the start of the conflict. Crude oil prices rose, which led to an increase in inflation expectations and a rise in both yields and U.S. dollar. dollar."

Dollar?index increased, making bullion priced in greenbacks more expensive for holders of other currencies. Benchmark 10-year U.S. Treasury yields increased 0.6%.

Stock markets wobbled and oil prices spiked, as tensions in the Middle East pushed shipping into the Gulf to the bare minimum.

The U.S. seized a cargo ship from Iran that was trying to circumvent its blockade, and Iran has said that it will retaliate. This raises the possibility that even the two-day ceasefire that is supposed to be in place between the two nations may not last.

Tehran has said that it will not take part in the second round of talks the U.S. hoped to start before the ceasefire ends on Tuesday.

Since the U.S. launched its strikes against Iran in late Feburary, gold prices have fallen about 8%. This is due to fears that higher energy costs could stoke inflation.

Gold is a good inflation hedge but higher interest rates will reduce demand for this non-yielding investment.

Gold demand at one of India's most important buying festivals was muted on Sunday, as record prices slowed jewellery purchases, which offset a modest increase in investment demand.

Silver spot fell 1.3%, to $79.75 an ounce. Platinum dropped 0.8%, to $2,086.90. Palladium was 0.4% lower, at $1,553. (Reporting and editing by Subhranshu sahu, Mrigank dhaniwala; Noel John from Bengaluru)

(source: Reuters)