BY COMFORT OGBONNA
Gold prices extended their losses on Monday as growing expectations of a possible U.S. Federal Reserve rate hike weighed on the precious metal, following a stronger-than-expected U.S. jobs report. At the same time, escalating tensions in the Middle East pushed oil prices higher, adding fresh inflation concerns to already fragile global markets.
Spot gold fell by about 1% to $4,287.66 per ounce at 0544 GMT, after dropping roughly 3% in the previous session to its lowest level since March 24. U.S. gold futures for August delivery also declined, slipping 1.2% to $4,311 per ounce. The sustained weakness reflects increasing pressure from rising bond yields and shifting interest rate expectations in financial markets.
Market analysts noted that investor sentiment has turned more cautious toward gold as traders increasingly price in the possibility of tighter monetary policy from the U.S. central bank. According to Kelvin Wong, a senior market analyst at OANDA, the market’s shift toward a more hawkish outlook for the Federal Reserve has been a key driver behind gold’s recent decline. He added that rising Treasury yields have further reduced the attractiveness of gold, which does not generate interest income.
The yield on the benchmark 10-year U.S. Treasury note climbed after reaching a two-week high in the previous session. Higher yields typically make interest-bearing assets more appealing compared with non-yielding assets such as gold, increasing the opportunity cost of holding the precious metal.
The pressure on gold comes amid a stronger U.S. labor market, with recent data showing the economy recorded its third consecutive month of solid job gains in May. The report reinforced the view that the labor market remains resilient, giving policymakers more flexibility but also raising concerns that inflation could remain elevated for longer than expected.
Market participants are now increasingly betting that the Federal Reserve may need to maintain higher interest rates for an extended period or even implement additional tightening measures before the end of the year. Data from the CME Group’s FedWatch tool indicates that traders are pricing in a notable probability of a rate hike by December, reflecting a significant shift in expectations following the latest employment figures.
Federal Reserve officials have acknowledged that the labor market remains strong, with Cleveland Federal Reserve President Beth Hammack recently stating that employment conditions appear to be near full capacity. She also noted that persistent inflation pressures could force policymakers to consider further rate increases if price stability does not improve in the coming months.
At the same time, geopolitical developments have added another layer of uncertainty to global markets. Israel reportedly conducted strikes on military targets in western and central Iran, even as diplomatic efforts continue to prevent further escalation. Although there have been calls for restraint, tensions remain high, raising concerns about the stability of energy supplies in the region.
Oil prices reacted sharply to the renewed conflict, rising by more than $3 per barrel. The increase reflects growing fears that disruptions in the Middle East could affect global crude supply chains, particularly routes that are already under strain due to ongoing instability. Higher oil prices have also intensified concerns about inflation, as energy costs remain a key component of broader price pressures worldwide.
While gold is traditionally viewed as a hedge against inflation and geopolitical risk, its performance has been overshadowed by rising interest rates, which tend to reduce demand for non-yielding assets. This dynamic has weakened investor appetite for gold despite heightened global uncertainty.
Other precious metals also declined alongside gold. Spot silver fell 2.2% to $66.33 per ounce, platinum dropped 2.1% to $1,739.78, and palladium decreased 1.5% to $1,207.50, reflecting a broader downturn across the precious metals market.
Financial markets continue to be shaped by a complex mix of stronger economic data, shifting monetary policy expectations, and escalating geopolitical risks. Investors are closely watching upcoming economic releases and central bank commentary for clearer signals on the future direction of interest rates, which are expected to remain a dominant force influencing both commodity and currency markets in the weeks ahead.
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