Tensions escalate as Israel launches military operations against Iranian targets. The surge in oil prices exceeds $3 per barrel.
US interest rate hike anxieties triggered a downturn in gold prices on Monday, as investors reacted to a robust US jobs report and escalating tensions in the Middle East fueled inflation worries and boosted oil prices.
Related ↗IDR survey reveals UK pay settlements remain steady at 3.5% for a second consecutive month.Gold prices plummeted by 1% to a value of $4,287.66 per ounce at 0544 GMT yesterday morning. The decline marked a 3% drop from Friday's closing price, reaching its lowest point in nearly two months.
US gold futures contracts due in August fell by 1.2% to $4,311.
Read next ↗Gulf region stock markets decline sharply today suddenly.Market expectations of a rate hike by the Federal Reserve are driving up concerns, according to Kelvin Wong, a seasoned market expert at OANDA, who notes that rising Treasury yields are exacerbating gold's downward trend.
A sharp increase in the 10-year U.S. Treasury note's yield has pushed it to a two-week peak, thereby making gold less attractive due to higher opportunity costs.
On Monday, Israel launched strikes against military installations in western and central Iran, despite a reported warning from US President Donald Trump to Prime Minister Benjamin Netanyahu to hold off on further action.
Inflationary pressures intensified as oil prices surged by over $3 per barrel yesterday.
Higher interest rates typically suppress demand for gold, which doesn't generate returns in the form of interest payments.
US economic indicators revealed a third consecutive month of robust employment growth in May, underscoring the labor market's renewed momentum following a sluggish period in 2023. This trend has provided the Federal Reserve with increased flexibility to maintain interest rates despite escalating prices caused by the ongoing conflict between Iran and other nations.
Investors are factoring in a potential interest rate increase by the end of the year, with a significant 72% probability indicated by CME Group's FedWatch indicator for December.
Beth Hammack, Cleveland Fed President, noted on Friday that the labor market appears to be at a state of equilibrium, with job figures indicating near-full employment, but ongoing high inflation might necessitate an interest rate increase.
Silver prices plummeted by 2.2% to $66.33 an ounce, while platinum dropped 2.1% to $1,739.78 per ounce sharply. Palladium also declined, losing 1.5% of its value to settle at $1,207.50.
