Gold Prices Fall Over 1% Amid Stronger Dollar and Rising Middle East Tensions

Gold prices experienced a significant drop on Tuesday, falling more than 1% as a strengthening U.S. dollar and geopolitical instability weighed on the precious metal. Spot gold slipped 1.4% to settle at $4,108.56 per ounce, while gold futures fell 1.2% to $4,116.70 per ounce. The decline adds to recent difficulties for bullion, which last week concluded its worst quarter in 13 years.

The market shift was primarily driven by escalating tensions in the Middle East. The United Kingdom Maritime Trade Operations (UKMTO) reported attacks on three separate oil tankers near the Strait of Hormuz over a 24-hour period. In response to the incidents, which U.S. officials have attributed to Iran, the U.S. Treasury Department revoked a license authorizing the sale of Iranian oil and petrochemical products.

The attacks and subsequent U.S. action drew condemnation from other nations. Qatar and Saudi Arabia, whose tankers were among those targeted, both condemned the attacks and held Iran responsible. The UKMTO raised its threat level for the region from "substantial" to "severe." The heightened risk in the critical shipping lane caused oil prices to spike by more than 5%.

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The geopolitical turmoil increased demand for the U.S. dollar as a safe-haven asset. A stronger dollar typically makes gold, which is priced in dollars, more expensive for buyers using other currencies, thus dampening its appeal. The move toward the dollar overshadowed gold's traditional role as a safe haven during times of uncertainty.

Meanwhile, investors are also looking ahead to the release of the Federal Reserve's June meeting minutes on Wednesday. The report is expected to provide further insight into policymakers' thinking on future interest rate hikes. Higher interest rates tend to support the dollar and put pressure on non-yielding assets like gold.