Gold prices rose modestly on Monday, supported by sliding Treasury yields and a weaker U.S. dollar, as investors gauged inflation expectations after oil prices dropped amid a pause in Middle East hostilities.

Spot gold rose 0.7% to $4,082.42 an ounce by 09:37 ET (13:37 GMT), while gold futures expiring in August inched up 0.3% to $4,083.25 an ounce.

The U.S. dollar on Friday was on course for its best week in over a month, boosted by safe-haven demand amid a widening conflict in the Middle East and expectations of interest rate hikes to combat oil-driven inflationary pressures.

Meanwhile, the Japanese yen headed for its steepest weekly decline in more than two months as it hovered near four-decade lows against the dollar despite repeated intervention warnings from Tokyo. Elsewhere, the sterling was set for its worst week since mid-June after new United Kingdom Prime Minister Andy Burnham took office. 

Oil prices fell sharply on Monday, triggered by signs of de-escalation between the United States and Iran, wiping out much of last week’s war premium that had briefly pushed Brent crude to the $100-a-barrel mark.

As of 09:22 ET (13:22 GMT), Brent crude futures had slumped 6.0% to $91.00 a barrel, while U.S. West Texas Intermediate crude futures tumbled 5.5% to $84.34 a barrel.

Gold fell on Thursday after hitting over a two-week high in the previous session, as the dollar firmed amid soaring oil prices, fueling inflationary concerns and driving up U.S. Treasury yields on rising expectations for Federal Reserve rate hikes. 

The yellow metal had bounced back over the last two days, largely helped by technical buying after repeatedly testing the key psychological level of $4,000/oz last week.