Gold prices fell by more than 1% on Tuesday and were on track for their largest monthly decline since October 2008, as concerns over the Middle East took a back seat to expectations of higher U.S. interest rates aimed at curbing elevated inflation.
Spot gold dropped 1.5% to $3,956.92 per ounce by 02:21 GMT, bringing its losses since the start of the month to 12.7%. If sustained, this would mark the precious metal’s fourth consecutive monthly decline. U.S. gold futures for August delivery also fell 1.7% to $3,969.30 per ounce.
Gold is also heading for its first quarterly decline since 2024 and its largest quarterly drop since the second quarter of 2013. The conflict involving Iran has driven energy prices sharply higher, fueling inflation concerns and strengthening expectations that interest rates will rise further.
Edward Meir, an analyst at Marex, said: “High inflation, expectations of higher interest rates, and a strong dollar are outweighing all the factors that would normally support higher gold prices.”
Although gold is traditionally viewed as a hedge against inflation, it tends to lose appeal in a high-interest-rate environment because it does not generate yield.
According to CME Group’s FedWatch Tool, traders are now pricing in three interest-rate hikes by the U.S. Federal Reserve this year, with a 64% probability of another increase in September.
Investors are closely watching upcoming U.S. labor market data, including the ADP employment report and the nonfarm payrolls report for February, both due later this week, for further clues about the Federal Reserve’s policy path.
The U.S. dollar is on track for its second consecutive monthly gain, making gold more expensive for holders of other currencies.
Meanwhile, oil prices are heading for their largest quarterly decline since 2020 as investors await the outcome of potential U.S.-Iran discussions in Doha this week, despite Iran’s insistence that no meeting has yet been scheduled.
Meir expects gold to trade within a range of $3,500 to $4,400 during the second half of the year.
Among other precious metals, spot silver fell 2% to $57.13 per ounce, platinum lost 1.1% to $1,557.21, and palladium slipped 0.4% to $1,208.17. All three metals are also on track for both monthly and quarterly losses.
Reuters
