Gold prices extended losses on Monday as stronger-than-expected U.S. economic data increased expectations that the Federal Reserve could raise interest rates later this year.
Rising oil prices, driven by renewed hostilities in the Middle East, also heightened concerns over inflation.
Spot gold fell 0.2% to $4,319.09 an ounce by 0429 GMT. The metal had already dropped about 3% on Friday, touching its lowest level since March 24.
U.S. gold futures for August delivery declined 0.5% to $4,343.20.
Higher Rate Expectations Weigh on Gold
The latest pressure on bullion followed a strong U.S. jobs report.
The U.S. economy added 172,000 jobs in May, marking a third consecutive month of solid employment gains and suggesting the labour market had strengthened after slowing last year.
According to Kelvin Wong, senior market analyst at OANDA, markets have adopted a more hawkish view on Federal Reserve policy.
“It is all based on the hawkishness that the market has started to place on the Fed futures,” Wong said, adding that higher Treasury yields were also weighing on gold.
The benchmark 10-year U.S. 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.
Oil Prices Jump as Middle East Tensions Escalate
Oil prices rose by more than $3 a barrel after Israel said it had struck military targets in western and central Iran.
The attacks came despite reports that U.S. President Donald Trump had urged Israeli Prime Minister Benjamin Netanyahu to avoid further strikes.
Higher energy prices have added to fears that inflation could remain elevated.
While gold is traditionally viewed as a hedge against inflation, higher interest rates generally reduce the appeal of the non-yielding metal.
Markets See Greater Chance of Fed Rate Hike
According to the CME Group FedWatch Tool, markets are pricing in a higher probability of a Federal Reserve rate increase before the end of the year.
Traders currently see a 72% chance of a rate hike by December.
Cleveland Federal Reserve President Beth Hammack said on Friday that the latest employment figures showed the labour market remained close to full employment.
She added that persistently high inflation could require the Fed to tighten policy further.
Other Precious Metals
Among other precious metals:
- Spot silver was little changed at $67.86 an ounce.
- Platinum fell 0.5% to $1,767.42.
- Palladium was steady at $1,225.67.
TL;DR
Gold prices extended losses as strong U.S. jobs data boosted expectations of a Federal Reserve rate hike. Spot gold fell to $4,319.09 an ounce, while rising oil prices following Israeli strikes on Iran added to inflation concerns.
AI Summary
- Spot gold slipped 0.2% to $4,319.09 an ounce.
- Strong U.S. jobs data increased expectations of a Fed rate hike.
- Markets see a 72% probability of a rate increase by December.
- Oil prices jumped more than $3 a barrel after Israeli strikes on Iran.
- Platinum fell, while silver and palladium were largely unchanged.
