March 23 (Reuters) - Gold prices slipped more than 3% on Monday, extending their drop to a roughly four-month low, as an escalating Middle East conflict stoked inflation concerns and expectations of higher global interest rates.
FUNDAMENTALS
* Spot gold XAU= was down 3.3% at $4,340.09 per ounce, as of 0100 GMT, extending losses for a ninth consecutive session. The metal, which fell on Monday to its lowest level since January 2, lost more than 10% last week.
* U.S. gold futures GCcv1 for April delivery fell 5% to $4,347.
* Escalating the three-week-old war, Iran said on Sunday it would strike the energy and water systems of its Gulf neighbours in retaliation if U.S. President Donald Trump follows through with a threat delivered a day earlier to hit Iran's electricity grid in 48 hours.
* Iran's Revolutionary Guards said if Iranian power plants are attacked, the Strait of Hormuz will be completely closed and will not be opened until the destroyed power plants are rebuilt.
* Oil prices stayed above $110 a barrel, as investors weighed U.S. and Iranian threats to target energy facilities that could escalate the war against the release of millions of barrels of Iranian oil at sea to global markets. O/R
* The closure of the Strait of Hormuz kept crude elevated, stoking inflation through higher transport and manufacturing costs. While rising inflation typically boosts gold's appeal as a hedge, high interest rates curb demand for the non-yielding asset.
* Meanwhile, market pricing for a U.S. Federal Reserve interest rate hike this year has shot up, and is now seen as far more likely than a rate cut, as interest rate futures were pricing around a 27% chance of a rate hike by December, as per the CME FedWatch tool.
* Spot silver XAG= lost 3.3% to $65.55 per ounce. Spot platinum XPT= fell 4.4% to $1,838.45 and palladium XPD= was down 0.4% at $1,398.50.
DATA/EVENTS (GMT) | |
1500 | EU Consumer Confid. Flash March |
(Reporting by Noel John in Bengaluru; Editing by Sherry Jacob-Phillips)
((Noel.John@thomsonreuters.com;))
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