PRECIOUS-Gold extends decline on expectations of higher interest rates

By Ashitha Shivaprasad

March 24 (Reuters) - Gold prices extended their decline on Tuesday, weighed down by persistent Middle East tensions that fanned worries of inflation and expectations of higher interest rates globally.

Spot gold XAU= fell 0.4% to $4,389.26 per ounce by 2:11 p.m. ET (1811 GMT) after hitting its lowest since November on Monday.

U.S. gold futures GCcv1 for April delivery settled 0.1% lower at $4,402.00.

"If the war continues and energy prices keep grinding higher, it's not great news for gold," said Bart Melek, global head of commodity strategy at TD Securities.

"Gold is going to be under pressure for the second quarter, but I think by year-end, the gold outlook should again look pretty sweet, as we are hoping that by then central banks like the Fed will have more freedom and we could see the dollar ease and rates drop," he added. USD/ US/

Bullion, considered a safe haven and an inflation hedge, loses appeal in a high‑rate environment as it yields no interest.

Pakistan's prime minister said on Tuesday he was willing to host talks between the U.S. and Iran to help end the war, a day after U.S. President Donald Trump postponed threats to strike Iranian power plants following what he called "productive" talks.

The war has effectively halted shipments of about a fifth of global oil and liquefied natural gas through the Strait of Hormuz, pushing up energy prices and stoking inflation fears. Major central banks also emphasised their readiness to act if the war drives a broader surge in prices. O/R

"The recent price slump is likely to be just as much of an overreaction as the massive rise at the start of the year. In a sense, the pendulum has swung from one extreme to the other for gold," analysts at Commerzbank said in a note.

Spot gold is down over 21% from its January 29 peak of $5,594.82, and has lost nearly 17% since the U.S.-Israeli war on Iran began on February 28.

Among other metals, spot silver XAG= rose 0.4% to $69.43, platinum XPT= gained 1% to $1,900.13, while palladium XPD= lost 2.1% to $1,403.75.