Gold prices fell in Asian trading on Tuesday, declining for the third consecutive session, as investors assessed inflation and interest rate concerns ahead of the deadline set by US President Donald Trump for Iran.
Spot gold fell 0.5% to $4,627.91 an ounce by 06:13 (02:13 GMT), while U.S. gold futures dropped 0.7% to $4,652.20.
Prices settled down 0.6% on Monday after a volatile session.
Trump's threat to Iran raises inflation fears
The retreat came even as geopolitical risks escalated, with Trump warning that Iran could be cut off if it failed to reopen the Strait of Hormuz by his Tuesday 4:00 a.m. deadline, raising the prospect of a wider conflict in the Middle East.
The conflict has already disrupted global energy flows and pushed oil prices higher, fueling inflation fears and complicating expectations for monetary policy.
Gold usually finds support in geopolitical uncertainty, but instead came under pressure as rising oil prices fuel inflation expectations, which in turn weakens the prospects for near-term interest rate cuts by the US Federal Reserve.
Higher interest rates reduce the appeal of non-yielding assets such as gold, while a stronger dollar also weighs on bullion prices.
Iran rejects US ceasefire proposal
Diplomatic efforts to resolve the dispute have shown little progress. Iran rejected a US-backed proposal for a 45-day ceasefire and a gradual reopening of the Strait of Hormuz.
Iran instead called for a permanent settlement that would include lifting sanctions, security guarantees, and compensation for damages.
The failure to achieve a breakthrough has increased uncertainty across financial markets, as investors now closely monitor developments surrounding Trump's deadline.
Investors are also awaiting key US inflation data due on Friday, which is expected to provide clues about the Federal Reserve's interest rate path.
Among other precious metals, silver prices fell 1.2% to $71.94 an ounce, while platinum dropped 1.4% to $1,956.60 an ounce.
