Gold eased on Monday as the dollar held firm, while market participants remained cautious, watching out for any potential Iranian retaliation to U.S. strikes on its nuclear sites.

Spot gold was down 0.1% at $3,365.29 an ounc. U.S. gold futures fell 0.1% to $3,381.30.

The dollar rose 0.6% against its peers, making gold more expensive for foreign buyers.

Higher energy prices could potentially delay a Fed rate cut and strengthen the dollar, said Ole Hansen, head of commodity strategy at Saxo Bank.

"Continued and multiple geopolitical uncertainties will likely continue to underpin and prevent prices from a deeper correction," he added.

Iran and Israel traded air and missile strikes as the world braced for Tehran's response to the U.S. attack on its nuclear sites and U.S. President Donald Trump raised the idea of regime change in the Islamic Republic.

Iran vowed to defend itself a day after the U.S. dropped 30,000-pound bunker-buster bombs onto the mountain above Iran's Fordow nuclear site.

The U.S. bombing of Iran's nuclear sites injected fresh uncertainty into the outlook for inflation and economic activity at the start of a week chock-full of new economic data and central banker commentary, including two days of Congressional testimony from Federal Reserve Chair Jerome Powell.

Source : Reuters