Gold prices slipped more than 1% on
Tuesday and were on track for their biggest monthly decline
since October 2008, as uncertainty in the Middle East gave way
to expectations of U.S. interest rate hikes to tame elevated
inflation.
Spot gold was down 1% at $3,975.04 per ounce, as of
0420 GMT, shedding 12.4% so far in the month in what could be
its fourth consecutive monthly fall. U.S. gold futures
for August delivery lost 1.2% to $3,988.60.
Bullion was also set for its first quarterly fall since 2024
and the largest since the June quarter of 2013, as the Iran war
sent energy prices sharply higher, stoking inflation fears and
bets for interest rate hikes.
“You have high inflation, high interest rate expectations,
and a strong dollar, and that’s overriding all other bullish
factors that are typically associated with a gold rally,” said
Edward Meir, an analyst at Marex.
While gold is traditionally seen as a hedge against
inflation, it loses its appeal in a high-interest-rate
environment.
Traders expect three Federal Reserve rate hikes this year,
and are currently pricing in about a 64% chance of a September
increase, according to the CME FedWatch Tool.
Investors are now awaiting the June ADP employment and
nonfarm payroll data, both due this week, to further gauge the
Fed’s stance on rate hikes.
The dollar strengthened and was headed for a second monthly
gain, making greenback-priced bullion more expensive for holders
of other currencies.
Oil prices were on track for their sharpest quarterly
decline since 2020 as investors eyed the outcome of Iranian and
U.S. talks in Doha this week, even as Iran said no meeting had
been scheduled.
“Gold bulls need at least one of three things to improve:
lower real yields, a softer USD or a clearer unwind in hawkish
Fed expectations. Without that, rallies are likely to be faded
and gold may spend more time consolidating below previous
highs,” OCBC precious metals strategist Christopher Wong said in
a note.
Spot silver fell 1.6% to $57.35 per ounce, platinum
lost 0.5% to $1,566.90 and palladium gained 0.5%
to $1,219.55. All three metals were headed for quarterly and
monthly losses.