Gold on track for biggest monthly drop in 17 years

Gold rose on Tuesday but remains on track for its largest monthly decline in more than 17 years. Investors have increasingly favored the dollar as a safe-haven asset amid the ongoing conflict in the Middle East, which has heightened inflation fears and fueled expectations for a hawkish monetary policy response.

Spot gold rose 0.9% to $4,550.68 per ounce, while United States gold futures for April delivery gained 0.5% to reach $4,580.70. Despite the daily uptick, the precious metal has dropped more than 13% this month, marking its sharpest decline since October 2008. On a quarterly basis, however, prices are up roughly 5%, having reached a record high of $5,594.82 on January 29.

Market participants are currently viewing the precious metal through a value-investment lens following the recent price correction. Tim Waterer, chief market analyst at KCM Trade, noted that several factors contributed to the daily rise.

So, it's a combination of falling oil, a dip in the dollar and attractive buying levels, which has propelled gold higher today.

While gold is often viewed as a hedge against inflation and geopolitical risk, the surge in energy costs driven by war has also increased expectations for higher interest rates. This has bolstered the appeal of the dollar, which is currently on track for its largest monthly gain since July. The currency's strength is further supported by the status of the U.S. as an energy exporter and a broad shift toward cash among investors.

Traders have largely removed expectations for interest rate cuts this year, a sharp contrast to the two cuts anticipated prior to the conflict. Analysts also remain watchful of the Strait of Hormuz, as any prolonged closure could keep oil prices volatile and continue to pressure gold prices.

So, this high oil story, which has plagued gold prices since the conflict began, hasn't gone away yet.

Looking ahead, some financial institutions maintain a positive long-term outlook. The Goldman Sachs Group, Inc. continues to forecast that gold prices will reach $5,400 per troy ounce by the end of 2026, driven by central bank diversification and eventual easing by the Federal Reserve.

The broader metals market also saw a rebound on Tuesday. Silver climbed 2.7% to $71.89 per ounce, while Platinum rose 1% to $1,917.49. Palladium also gained 1.5%, trading at $1,427. Despite these daily gains, all three metals have suffered losses of approximately 20% over the course of March.