Gold prices continued to decline during today’s trading, hitting their lowest level in 11 weeks, as pressure persisted from strong US labor market data and rising expectations that interest rates will remain elevated for longer. This came alongside a rise in oil prices following renewed tensions in the Gulf region, bringing inflation concerns back to the forefront of markets.
Spot gold fell 0.4% to $4,312.08 per ounce, reaching its lowest level since March 23, while US gold futures for August delivery declined 0.7% to $4,337.10 per ounce. The yellow metal had lost more than 3% in Friday’s session after US jobs data pushed investors to reassess their expectations for the path of monetary policy in the coming period.
The data showed that the US economy added 172,000 jobs in May, beating analysts’ expectations, while the unemployment rate held steady at 4.3%. This reading strengthened market conviction that the Federal Reserve may continue to keep interest rates at elevated levels, with some expectations even starting to price in the possibility of a rate hike at the December meeting. This was directly reflected in higher bond yields and a stronger US dollar.
As the dollar rose, gold’s appeal weakened as a non yielding asset, especially in an environment where real yields are rising and the cost of holding the precious metal is increasing. Although gold usually benefits from safe haven demand during periods of geopolitical tension, expectations for higher interest rates and the strength of the US currency had a stronger impact on recent market movement.
Goldman Sachs believes the US dollar remains supported by strong economic data and rising rate expectations, especially after solid jobs figures and resilient activity indicators helped lift bond yields and widen yield differentials in favor of the US currency. However, the bank noted that further dollar gains may remain limited, particularly against commodity linked currencies and emerging market currencies, alongside the continued resilience of the Japanese yen.
Pressure on gold increased as oil prices rose after Iran launched several waves of missiles toward Israel in response to an Israeli strike on the outskirts of Beirut. The move raised fears of a wider regional conflict and threatened a fragile ceasefire. Brent crude climbed toward $96 per barrel, while US crude traded above $93, adding to concerns that energy related inflation pressures could return.
In other precious metals, silver fell 0.8% to $67.32 per ounce, while platinum declined 0.6% to $1,770.58 per ounce. This indicates that pressure from the dollar and interest rate expectations was not limited to gold alone, but extended across most major precious metals.
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