Gold prices dropped more than 3% on Monday, extending their recent decline as higher oil prices, rising U.S. Treasury yields and expectations for additional Federal Reserve rate hikes pressured bullion.
At 04:58 ET, spot gold fell 3.3% to $4,146.12 per ounce, while Gold Futures declined by the same percentage to $4,178.05.
Silver also came under heavy pressure, with XAG/USD falling 5.12% to $61.02. Platinum dropped 3.2% to $1,725.01, while the U.S. Dollar Index edged 0.1% higher to 101.09.
Oil Prices Keep Inflation Risks Elevated
Oil prices moved higher as uncertainty surrounding the Strait of Hormuz continued to dominate energy markets.
Iran said it would not ease its conditions for reopening the strategically important waterway. Meanwhile, U.S. President Donald Trump rejected Tehran’s seven-day proposal to reopen the strait.
However, Trump also said he expects negotiations with Iran to resume during the week.
The continuing U.S.-Iran conflict has now entered its eighth month, while Brent crude oil has gained roughly 70% this year.
Persistently high energy prices are increasing inflation concerns and have become a key factor for investors assessing the Federal Reserve’s interest-rate outlook.
Rising Treasury Yields Pressure Gold
Higher bond yields have added another source of pressure for gold prices.
Cleveland Federal Reserve President Beth Hammack said long-term Treasury yields are being driven higher by stronger economic growth expectations, concerns over government debt and expectations for further rate increases.
The Federal Reserve raised its benchmark interest rate by 25 basis points in mid-September.
Since then, several policymakers have suggested that more tightening could be required if inflation remains elevated.
Markets are currently pricing in approximately a 65% chance of another interest-rate increase in October.
Gold Breaks Below the $4,200 Level
Gold extended its decline below $4,200 as traders continued to reassess the outlook for U.S. monetary policy.
The precious metal had traded within a relatively narrow range earlier in the month. However, the latest selloff has pushed spot gold below the previous $4,230 to $4,510 range monitored by traders.
Gold also remains significantly below its record high of almost $5,600 per ounce, which was reached in January.
The decline highlights how quickly market sentiment has shifted as higher yields and tighter monetary policy expectations reduce the appeal of non-yielding assets such as gold.
Stronger Dollar Adds to Bullion Weakness
A firmer U.S. dollar has also weighed on precious metals.
Because gold is priced in dollars, a stronger greenback generally makes bullion more expensive for buyers using other currencies.
ANZ said the current macroeconomic environment remains difficult for gold, with elevated Treasury yields and a stronger dollar creating additional downward pressure.
However, the bank noted that investment demand remains relatively resilient.
Gold exchange-traded fund holdings have increased by around 50 tonnes so far this month, suggesting that some investors are still maintaining exposure to the precious metal.
Treasury Yield Curve Narrows
Developments in the bond market have also attracted attention.
The spread between 10-year and two-year U.S. Treasury yields narrowed to around 17 basis points last week.
That marked the smallest gap since early 2025.
Changes in the yield curve are closely watched by investors because they can provide signals about expectations for economic growth, inflation and future Federal Reserve policy.
US Consumer Sentiment Weakens
U.S. consumer sentiment also deteriorated in September.
The latest reading fell to a four-month low as households became increasingly concerned about higher prices and the broader economic outlook.
Weakening confidence could eventually influence consumer spending, although inflation remains a major concern for policymakers.
Bessent Urges Fed to Remain Flexible
U.S. Treasury Secretary Scott Bessent has called on the Federal Reserve to remain flexible when assessing future interest-rate decisions.
Bessent argued that productivity improvements linked to artificial intelligence and deregulation could help reduce inflationary pressures over time.
This view contrasts with concerns that higher energy costs could keep inflation elevated and force the Fed to maintain a more restrictive policy stance.
PCE Inflation and Jobs Data in Focus
Investors will now turn their attention to two major U.S. economic releases.
The August Personal Consumption Expenditures inflation report is due on Wednesday.
The PCE price index is closely watched because it is one of the Federal Reserve’s preferred measures of inflation.
Markets will then focus on Friday’s September employment report.
The latest nonfarm payrolls figures could provide additional clues about the strength of the U.S. economy and whether the Federal Reserve is likely to continue raising interest rates.
For gold, the combination of higher oil prices, elevated bond yields, a stronger dollar and renewed Fed rate hike expectations remains the main source of near-term pressure.
