Gold extends losses on rate-hike fears, inflation concerns

Gold prices extended losses on Monday amid growing fears of a potential U.S. interest rate hike following a strong jobs report, while renewed hostilities in the Middle East pushed oil prices higher and added to inflation concerns, News.Az reports, citing Reuters.

Spot gold fell 1% to $4,287.66 per ounce by 0544 GMT. The metal had already dropped about 3% on Friday, reaching its lowest level since March 24.

U.S. gold futures for August delivery declined 1.2% to $4,311.

The yield on the benchmark 10-year U.S. Treasury note rose after climbing to a two-week high in the previous session, increasing the opportunity cost of holding non-yielding bullion such as gold.

On the geopolitical front, Israel said it struck military targets in western and central Iran on Monday, even after U.S. President Donald Trump reportedly urged Israeli Prime Minister Benjamin Netanyahu to avoid further attacks.

Oil prices surged by more than $3 per barrel, intensifying concerns about inflationary pressures and the likelihood of future interest rate increases.

While gold is typically viewed as a hedge against inflation, higher interest rates tend to weigh on the non-yielding asset.

The U.S. economy recorded a third consecutive month of strong job gains in May, reinforcing views that the labor market is regaining momentum after a slowdown last year. This has given the Federal Reserve more flexibility to maintain current rates, even as inflation pressures rise amid the Iran conflict.

Markets are now pricing in a Federal Reserve rate hike before the end of the year, with a 72% probability of a move by December, according to CME Group’s FedWatch Tool.

Beth Hammack said on Friday that recent employment data suggests the labor market is near full employment and broadly in balance, but persistent inflation could still force the Federal Reserve to raise interest rates sooner than expected to contain price pressures.

In other precious metals trading, spot silver fell 2.2% to $66.33 per ounce, platinum declined 2.1% to $1,739.78, and palladium dropped 1.5% to $1,207.50.

News.Az 

By Nijat Babayev