Gold drops as stronger dollar and Middle East troop buildup shake bullion

Gold prices moved sharply lower on Friday, retreating as the US dollar strengthened after reports that Washington was sending additional military personnel to the Middle East, stoking market fears over oil prices, inflation and the possibility of higher interest rates.

Spot gold fell 1.8 per cent to $4,563.64 an ounce after earlier posting gains of around 1 per cent during the session. US gold futures for April also edged lower, slipping 0.7 per cent to $4,574.90.

The decline came as the dollar and US Treasury yields pushed higher following a Reuters report that the United States was deploying thousands of extra marines and sailors to the region. A firmer dollar typically makes gold more expensive for buyers using other currencies, reducing its appeal in international markets.

The latest market jitters are tied to the widening fallout from the US-Israeli war on Iran, which has already caused heavy casualties, destabilised parts of the Middle East and rattled the global economy since the conflict escalated on February 28. Iran’s continued disruption of shipping through the Strait of Hormuz has added to concerns that energy prices could remain elevated, feeding inflationary pressure across major economies.

Analysts said precious metals were coming under pressure as investors reassessed the chances of central banks keeping rates higher for longer. Gold is often seen as a safe-haven asset during times of crisis and inflation, but rising interest rates can reduce demand because the metal does not offer any yield.

Independent metals trader Tai Wong said gold and silver were being pulled lower as markets headed into the weekend amid persistent anxiety, adding that metals had become especially unstable after this week’s sharp sell-off driven by fears of further rate increases.

Expectations of tighter monetary policy have also gained momentum elsewhere. Major global brokerages now see a rising possibility that both the European Central Bank and the Bank of England could move towards rate hikes as early as April.

The US Federal Reserve this week left rates unchanged, but signalled that inflation risks remain significant. Federal Reserve Chair Jerome Powell also warned that the outlook for policy had become unusually uncertain because of the war and its broader economic consequences.

Other precious metals also ended the day in negative territory. Spot silver dropped 4.8 per cent to $69.39, platinum lost 0.9 per cent to $1,953.18, and palladium fell 1.6 per cent to $1,423.59. All three were heading towards weekly losses as investors pulled back from metals amid a stronger dollar and growing rate concerns.