Gold prices extended losses on Monday, falling to their lowest level in more than two months as investors reacted to growing expectations that the US Federal Reserve could raise interest rates before the end of the year.
Spot gold slipped 0.3% to $4,315.71 an ounce by 0725 GMT after touching its weakest level since March 23 earlier in the session. The precious metal had already suffered a sharp sell-off on Friday, losing about 3%.
US gold futures for August delivery also declined, falling 0.6% to $4,341.10 per ounce.
Analysts said stronger-than-expected US economic data, particularly robust employment figures, reinforced expectations that the Federal Reserve may keep monetary policy tight or even raise rates further to combat inflation.
“It is all based on the hawkishness that the market has started to place on the Fed futures,” said Kelvin Wong, a senior market analyst at OANDA.
Higher Treasury yields also weighed on bullion. The benchmark 10-year US Treasury yield rose after reaching a two-week high in the previous session, increasing the opportunity cost of holding non-yielding assets such as gold.
At the same time, renewed tensions in the Middle East added to concerns about inflation. Israel said it struck military targets in western and central Iran on Monday despite reports that US President Donald Trump had urged Israeli Prime Minister Benjamin Netanyahu to avoid further attacks.
The escalation pushed oil prices up by more than $4 a barrel, raising fears that higher energy costs could fuel inflation and prompt central banks to maintain tighter monetary policies.
While gold is traditionally viewed as a hedge against inflation and geopolitical uncertainty, higher interest rates tend to reduce its appeal because it does not generate interest income.
The latest US labour market data further strengthened expectations of a policy response from the Federal Reserve. The economy recorded a third consecutive month of strong job growth in May, suggesting the labour market has regained momentum after slowing last year.
According to CME Group’s FedWatch tool, financial markets are now pricing in a 72% chance of a Federal Reserve rate increase by December.
Cleveland Federal Reserve President Beth Hammack said on Friday that employment conditions remain close to full employment, while persistent inflationary pressures may require policymakers to consider raising rates in the coming months.
Elsewhere in precious metals markets, spot silver fell 0.5% to $67.47 an ounce, platinum dropped 0.6% to $1,766.70, while palladium edged 0.3% higher to $1,229.
Erizia Rubyjeana
Follow us on:
