Gold Prices Drop to 11-Week Low as Fed Rate Expectations and Rising Oil Prices Weigh

Gold prices continued their decline during Asian trading on Monday, falling to their lowest level in nearly three months as strong U.S. employment data reinforced expectations that the Federal Reserve could keep interest rates elevated for longer.

At the same time, a sharp rebound in oil prices driven by renewed tensions in the Middle East increased inflation concerns, creating additional pressure on the precious metal.

Gold Extends Recent Losses

Spot gold fell 0.4% to $4,312.08 per ounce during Asian trading, touching its lowest level since March 23.

Meanwhile, U.S. gold futures for August delivery declined 0.7% to $4,337.10 per ounce.

The latest weakness follows a steep decline on Friday, when gold lost more than 3% after investors reassessed the outlook for U.S. monetary policy.

Strong U.S. Jobs Data Boosts Rate Hike Expectations

The selloff was triggered by stronger-than-expected labor market figures released last week.

According to the latest report, the U.S. economy added 172,000 jobs in May, significantly exceeding economists’ expectations. At the same time, the unemployment rate remained unchanged at 4.3%.

The robust employment data reinforced the view that the Federal Reserve may delay interest rate cuts and could potentially maintain restrictive monetary policy for longer than previously anticipated.

As a result, Treasury yields and the U.S. dollar moved higher, reducing the attractiveness of non-yielding assets such as gold.

Analysts at ING noted that financial markets are now increasingly pricing in the possibility of an additional Federal Reserve rate hike before the end of the year.

Stronger Dollar Continues to Pressure Gold

The U.S. dollar remained a major headwind for gold prices.

The US Dollar Index held near a two-month high after posting strong gains in the previous trading session. A stronger dollar typically makes gold more expensive for international buyers, which can reduce demand and weigh on prices.

Despite ongoing geopolitical risks, investors have largely favored the dollar over precious metals as expectations for higher U.S. interest rates continue to strengthen.

Middle East Tensions Push Oil Prices Higher

Geopolitical developments also played a key role in market sentiment.

Oil prices surged after Iran launched multiple missile attacks toward Israel in response to an Israeli strike near Beirut. The escalation increased concerns that the conflict could spread further across the region and threaten an already fragile ceasefire.

Brent crude oil climbed toward $96 per barrel, while U.S. crude traded above $93 per barrel.

The rise in energy prices has renewed concerns about inflation, as higher oil costs can increase transportation, manufacturing and consumer expenses worldwide.

Inflation Fears Offset Safe-Haven Appeal

Gold traditionally benefits from safe-haven demand during periods of geopolitical uncertainty. However, the current market environment has been dominated by concerns surrounding inflation and interest rates.

Rising oil prices could contribute to higher inflation, making it more difficult for central banks to ease monetary policy. This has strengthened expectations for higher borrowing costs and supported the U.S. dollar, offsetting some of gold’s traditional safe-haven appeal.

Silver and Platinum Also Move Lower

Other precious metals also traded lower during Monday’s session.

Silver prices declined 0.8% to $67.32 per ounce, while platinum slipped 0.6% to $1,770.58 per ounce.

The broader weakness across the precious metals sector reflects growing expectations that higher interest rates and a stronger U.S. dollar may continue to pressure commodity prices in the near term.