Gold prices dropped more than 1% on Monday, June 1. Renewed military exchanges between the U.S. and Iran over the weekend reduced hopes for a ceasefire.
The U.S. military targeted Iranian air defense and drone facilities. Iran responded with a missile strike against an airbase in Kuwait used by U.S. forces.
Investors favored the U.S. dollar over gold as the primary safe-haven asset during the escalation. The strengthening dollar made gold more expensive for international buyers.
Surging oil prices resulting from the conflict also increased inflation fears. This trend reinforced expectations that the Federal Reserve will maintain higher interest rates, further pressuring the non-yielding metal.