Gold falls as Houthi attack lifts oil, Fed rate-cut hopes dim

Gold prices fell on Monday, as a surge ‌in energy prices fuelled inflation worries and dampened expectations for U.S. Federal Reserve interest rate cuts this year.

Spot gold fell 0.6% to $4,466.99 per ounce as of 0238 GMT. U.S. gold futures for April delivery shed ​0.6% to $4,496.30.

Gold has lost more than 15% so far this month, marking its ​steepest monthly decline since October 2008, as the U.S. dollar strengthened. The currency ⁠has gained more than 2% since the U.S.-Israeli war on Iran began on February ​28.

"The bigger macro picture behind that (gold's) underperformance is the huge shift in interest rate expectations... The ​USD has picked up on that, and as gold's outlook was likewise rate-dependent, largely with expectations that the policy rate would fall under a new Federal Reserve chair, which has worked against gold," said Nicholas Frappell, ​global head of institutional markets at ABC Refinery.

Traders now see little chance of a U.S. ​rate cut this year, as higher energy prices threaten to feed into broader inflation and limit scope ‌for ⁠monetary easing. That contrasts with expectations for two rate cuts before the conflict began. 

While inflation typically boosts gold's appeal as a hedge, elevated interest rates weigh on the non-yielding metal's demand.

Brent crude oil climbed above $115 a barrel after Yemeni Houthis launched attacks on Israel over the weekend, ​widening the ongoing ​war and adding to ⁠inflation woes. The contract was up 60% in March, a record monthly rise.

U.S. President Donald Trump said he wants to "take the oil in ​Iran" and could seize the export hub of Kharg Island, in an ​interview with ⁠the Financial Times published on Sunday.

"Gold's price action last week suggested a reaction to oversold behaviour, and a possible reversal of recent declines. However, this needs to be confirmed by price ⁠action this ​week. Given the rapid flow of headline news, it's ​easiest to expect volatility," Frappell said.

Spot silver fell 1.3% to $68.67 per ounce. Spot platinum gained 0.3% to $1,868.11 and palladium ​rose 1% to $1,391.