Gold prices fall on dollar strength, fading US rate-cut hopes

March 9 (Reuters) – Gold prices fell on Monday, as a stronger U.S. dollar weighed ‌on the greenback-priced bullion, while higher energy costs fuelled inflation concerns and further dimmed the prospects for near-term reductions in interest rates.

Spot gold shed 1.4% to $5,097.70 per ounce as of 0750 GMT, after falling more ​than 2% earlier in the session. U.S. gold futures for April delivery lost 1% ​to $5,106.

The U.S. 10-year Treasury yields climbed to a one-month ​high, raising the cost of holding non-yielding gold.

“Gold is on the back foot today despite ​the market tumult, with triple-digit oil prices boosting the dollar on inflation fears and scaled back rate-cutting expectations,” said Tim Waterer, KCM Trade chief market analyst.

Crude oil prices surged more than 15% to above $110 per ​barrel, as the widening U.S.-Israeli war with Iran prompted some major Middle Eastern oil ​producers to cut supplies amid fears of prolonged disruption to shipments through the Strait of Hormuz.

“Much of ‌gold’s price ⁠rise over the last 12 months was predicated on a dovish outlook for U.S. interest rates, but given the inflation risk presented by $100 per barrel oil, rate cuts are no longer a given and gold has repriced accordingly,” Waterer said.

Investors expect the U.S. Federal Reserve ​to hold rates steady ​at the end ⁠of its two-day meeting on March 18, per CME Group’s FedWatch tool. The odds of a June hold, which were below 43% last ​week – when the war began, climbed to more than 51%.

Non-yielding bullion ​tends to ⁠thrive in a low-interest-rate environment.

Meanwhile, Iran on Monday named Mojtaba Khamenei to succeed his father, Ali Khamenei, as supreme leader, signalling that hardliners remain firmly in charge and further escalating tensions in the region.

Spot ⁠silver fell ​1.3% to $84.42 per ounce, after losing over 5% earlier ​in the session. Spot platinum lost 1.3% to $2,108.05 and palladium fell 2.4% to $1,586.75.