Rising oil prices and growing expectations of higher U.S. interest rates are putting fresh pressure on gold.
Gold extended its decline on Monday after renewed military action between the United States and Iran pushed oil prices higher, raising concerns about inflation and reducing demand for the precious metal.
Spot gold slipped 0.6% to $4,062.89 per ounce, while U.S. gold futures for August delivery fell 0.5% to $4,077.50. Gold is now on track for a fourth straight monthly decline, down 10.4% over the period.
The latest losses followed fresh strikes by both Washington and Tehran over the weekend. Iran launched missiles and drones at U.S. military sites in Bahrain and Kuwait after President Donald Trump warned of severe consequences if Iran failed to honor an agreement to end the conflict. Later, Axios reported that both countries had agreed to pause hostilities and resume talks over the Strait of Hormuz.
Analysts say higher oil prices could keep inflation elevated, increasing the likelihood of further Federal Reserve rate hikes. Markets are currently pricing in three Fed rate hikes this year, with around an 80% chance of another increase in December.
Investors are now focused on this week's U.S. ADP employment report and nonfarm payrolls data, which could shape expectations for future Fed policy. According to KCM Trade analyst Tim Waterer, gold could return to the $5,000 level later this year if geopolitical tensions ease, oil retreats to pre-war levels, and the U.S. dollar weakens.
Market Reaction
Oil prices climbed, gold weakened, silver dropped 1.2% to $58.47, while platinum gained 0.2% and palladium rose 0.4%.
Why It Matters
Higher interest rates increase the appeal of yield-bearing assets, making gold less attractive even during periods of geopolitical uncertainty.
Traders will closely watch upcoming U.S. employment data and any developments in U.S.-Iran negotiations, as both could influence inflation expectations, Federal Reserve policy, and the next move in gold prices.
Stay ahead of every market-moving headline - start trading with a broker built for moments like this: TradeQuo.com
Source: Reuters
Time: 10:30 AM EEST
