Gold heads for biggest monthly decline since 2008 on rate hike fears

Expectations of higher US interest rates and a stronger dollar outweighed geopolitical concerns, sending gold prices sharply lower

Gold prices fell more than 1 per cent on Tuesday and were set for their biggest monthly decline since October 2008, ​as uncertainty in West Asia gave way to ​expectations of US interest rate hikes to tame elevated inflation.

Spot gold declined ‌1.5 per cent to $3,956.92 per ounce by 0221 GMT, shedding 12.7 per cent so far in the month in what would be its fourth straight monthly fall. US gold futures for August delivery lost 1.7 per cent to $3,969.30.

Bullion was also set for its first quarterly fall since 2024 and the largest since the June quarter of 2013, as the Iran war sent energy prices sharply higher, stoking inflation fears and bets for interest rate hikes.

 

"You have high inflation, high interest rate expectations, and a strong dollar, and that's overriding all ‌other bullish factors that are typically associated with a gold rally," said Edward Meir, an analyst at Marex.

While gold is traditionally seen as a hedge against inflation, it loses its appeal in a high-interest-rate environment.

Traders expect three Federal Reserve rate hikes this year, and are currently pricing in about a 64 per cent chance of a September increase, according to the CME FedWatch Tool. [FEDWATCH/]

Investors are now ​awaiting the June ADP employment and nonfarm payroll data, both due this week, to further gauge ‌the Fed's stance on rate hikes. 

The US dollar was headed for a second monthly gain, making bullion more expensive for holders of other currencies. [USD/]

Oil ​prices ‌were on track for their sharpest quarterly decline since 2020 as investors eyed the ‌outcome of Iranian and US talks in Doha this week, even as Iran said no meeting had been scheduled.

Meir sees gold trading in the $3,500 to $4,400 ‌range ​in the second ​half of the year.

Spot silver fell 2 per cent to $57.13 per ounce, platinum lost 1.1 per cent to $1,557.21 and palladium slid 0.4 per cent to $1,208.17. All three metals were headed ‌for quarterly and ​monthly losses.