Gold prices slipped more than 1 per cent on Tuesday and were on track for their biggest monthly decline since October 2008, as uncertainty in the Middle East gave way to expectations of US interest rate increases to tame elevated inflation.
Spot gold was down 1 per cent at $3,975.04 per ounce as of 4.20am GMT (8.20am UAE time). It has shed 12.4 per cent so far in June in what could be its fourth consecutive monthly fall. US gold futures for August delivery lost 1.2 per cent to $3,988.60.
Bullion was also set for its first quarterly fall since 2024 and the largest quarterly fall since the June quarter of 2013, as the Iran war caused a surge in energy prices, stoking inflation fears and bets for interest rate rises.
"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 rises this year and are currently pricing in about a 64 per cent chance of a September increase, the CME FedWatch Tool shows. Investors are awaiting the June ADP employment and nonfarm payroll data, both due to be published this week, to further gauge the Fed's stance on rate increases.
The dollar strengthened and was heading for a second monthly gain, making bullion priced in US dollars more expensive for holders of other currencies.
Oil prices were on track for their sharpest quarterly decline since 2020 as investors looked to the outcome of potential talks between the US and Iran in Doha this week. Tehran said no meeting was scheduled.
"Gold bulls need at least one of three things to improve: lower real yields, a softer USD or a clearer unwind in hawkish Fed expectations. Without that, rallies are likely to be faded and gold may spend more time consolidating below previous highs," OCBC precious metals strategist Christopher Wong said in a note.
Spot silver fell 1.6 per cent to $57.35 per ounce, platinum lost 0.5 per cent to $1,566.90 and palladium gained 0.5 per cent to $1,219.55. All three metals were heading for quarterly and monthly losses.
