Gold Set for Lowest Monthly Performance Since 2008 as Fed Rate-Hike Expectations Surpass Safe-Haven Appeal
Gold prices fell more than 1% on Tuesday, marking a significant downturn as they headed for their steepest monthly decline since October 2008. Easing concerns over the Middle East conflict have shifted focus to expectations of higher US interest rates aimed at curbing inflation. Spot gold was priced at $3,975.04 an ounce, reflecting a 12.4% loss for June and positioning it for a fourth consecutive monthly decline. US gold futures for August delivery also dropped, slipping 1.2% to $3,988.60.
Biggest quarterly drop since 2013
Bullion is on track for its first quarterly decline since 2024, with losses expected to be the largest since the June quarter of 2013. The ongoing conflict in Iran has driven up energy prices, intensifying inflation concerns and bolstering expectations for US interest rate hikes. Edward Meir, an analyst at Marex, noted that high inflation, rising interest rate expectations, and a strong dollar are overshadowing typical bullish factors for gold. Although gold is traditionally viewed as a hedge against inflation, higher interest rates diminish its appeal as a non-yielding asset.
Focus shifts to Fed and jobs data
Market participants are now anticipating three rate hikes from the US Federal Reserve this year, with a 64% probability assigned to a potential increase in September, according to the CME FedWatch Tool. Investors are also looking ahead to the US ADP employment report and nonfarm payrolls data set to be released later this week for insights into the Fed’s policy direction.
Dollar strength weighs on bullion
The US dollar has strengthened, poised for a second consecutive monthly gain, which makes dollar-priced gold more expensive for buyers using other currencies. Oil prices are also expected to experience their sharpest quarterly decline since 2020, as markets monitor the potential outcomes of US-Iran talks in Doha, despite Iran’s assertion that no meeting has been scheduled. Christopher Wong, a precious metals strategist at OCBC, stated that gold bulls need lower real yields, a softer dollar, or a clearer shift away from hawkish Fed expectations to see improvement. Without these factors, gold may continue to consolidate below previous highs. Spot silver fell 1.6% to $57.35 an ounce, while platinum slipped 0.5% to $1,566.90. Palladium, however, rose 0.5% to $1,219.55, with all three metals facing monthly and quarterly losses.
Observer Voice is the one stop site for National, International news, Sports, Editor’s Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.
