Spot gold fell 0.5% per ounce at 1:44 p.m. ET (1744 GMT), and was down more than 2% for the week.
US gold futures for April were 1.3% lower at $5,061.70.
“While the market is bullish on gold over long-term asset allocation drivers, Bullion is headed for lower levels as the Iran conflict pushes the dollar to near four-month highs,” said Tai Wang, an independent metals trader.
The U.S. dollar continued to rise during the week, making greenback bullion less affordable for holders of other currencies.
Commerzbank said in a note that the expectation of a more restrictive monetary policy is the main reason for putting the price of gold under pressure.
While gold is valued as a traditional hedge against inflation and periods of uncertainty, higher prices generally reduce its appeal by increasing the cost of holding bullion. Data showed that US consumer spending rose slightly more than expected in January, which combined with continued strength in inflation and the war in the Middle East reinforced economists’ views that the Federal Reserve will not resume interest rate cuts for some time.
President Donald Trump said the United States would hit Iran “very hard” next week, shortly after issuing a partial 30-day waiver on Russian oil purchases.
Oil prices edged lower but were on track for weekly gains as the Gulf conflict continued to weigh heavily.
Elsewhere, the resumption of some flights from Dubai has allowed the flow of gold from this major international trade hub to resume somewhat this week, three sources told Reuters.
Among other metals, silver rose 3.3% to $81.00.
Platinum fell 4% to $2,047.20 and palladium fell 2.5% to $1,569.00. Sister metals are on track to post weekly losses.
