Gold traded

in a narrow range,

hovering near US$5,000 an ounce

, as the

conflict in the Middle East

entered a third week and investors weighed the

inflationary impact

of

higher oil prices

.

Bullion edged higher Monday, following two consecutive weeks of losses. Elevated crude prices from the

United States-Israel war with Iran

have put the metal under pressure, raising the prospect of fewer Federal Reserve interest rate cuts. Crude fluctuated around US$100 a barrel.

Uncertainty over how long the war will last has made it difficult for traders to assess the impact on markets and the wider economy. A top aide to U.S. President Donald Trump said the conflict could last four to six weeks, while both sides have given mixed signals.

Over the weekend, Iran launched fresh attacks across the Persian Gulf, disrupting shipments at a key United Arab Emirates oil hub and denying U.S. President Donald Trump’s assertion that it’s seeking ceasefire talks. Shipping remains near a standstill in the Strait of Hormuz, the strategic waterway through which

a fifth of the world’s oil and liquefied natural gas typically moves

.

As the war drags on, prospects for an interest-rate cut have dwindled. Traders now see virtually no chance of a rate cut at this week’s Fed meeting. Higher borrowing costs typically weigh on precious metals, which don’t pay interest.

The war has also boosted the dollar

at the expense of gold

. Though slightly down Monday, the greenback has risen about two per cent since the U.S. and Israel first struck Iran.

“The dollar has been the ultimate safe haven during this conflict,” said Daniel Ghali, senior commodity strategist at Toronto Dominion Bank. “That is detrimental to gold since over the last year, gold has been the ultimate safe haven.”

Though upward momentum has stalled, the yellow metal has still gained more than 15 per cent this year. Concerns over stagflation — a combination of slower growth and high inflation — may push investors toward gold as a better store of value over the longer term.

“Gold is more of a hedge against the wider impact of conflicts, rather than direct wartime threats,” UBS Global Wealth Management wrote in a note Monday. While higher energy prices and inflation have weighed on the metal, “gold primarily insulates against monetary risks like currency devaluation, rising deficits, and economic slowdowns, which can result from geopolitical conflicts,” the analysts wrote.

Spot gold rose 0.16 per cent to US$5,027.51 an ounce as of 10:21 a.m. in New York. Silver rose 0.94 per cent to US$81.35. Platinum gained, and palladium was steady. The Bloomberg Dollar Spot Index slipped 0.60 per cent after adding more than one per cent last week.

—With assistance from Yihui Xie and Preeti Soni.

Bloomberg.com