Gold prices sharply declined amid rising concerns about inflation, despite gold's traditional role as an inflation hedge.

Oil prices surged above $100 per barrel, with Brent crude moving above $108 per barrel amid the escalation of the Middle East war.

Higher gasoline prices can increase logistics costs across the economy, which can eventually raise household expenses. Higher crude oil prices can therefore directly put pressure on household costs.

Recent U.S. inflation data was stronger than expected, while rising oil prices added another layer of inflationary pressure. Markets are now pricing in around an 89% probability of a Fed rate hike, compared with about 67% before the latest inflation data.

Because gold does not generate interest income, higher interest rates can make interest-bearing assets relatively more attractive. Therefore, expectations of higher interest rates can put pressure on gold prices.

The U.S. dollar's strengthening has also played a major role in the decline. Since gold is priced in dollars, a stronger dollar makes gold relatively more expensive for investors holding other currencies, which can reduce demand.

Investors often turn to gold when inflation rises because it is viewed as a store of value and a hedge against inflation. However, the current scenario is different, as gold is not holding its traditional hedging role in the short term. The impact of monetary policy is currently weighing more heavily on gold prices.

The next major drivers for gold will be the Federal Reserve's policy decision, future U.S. inflation data, oil-price movements and developments in the Middle East. These factors will determine the direction of gold prices in the coming period.