Gold Falls to Two-Month Low as Fed Rate Hike Fears Grow Despite Middle East Tensions

Gold prices extended their decline on Monday, dropping to the lowest level in more than two months as investors increased bets that the U.S. Federal Reserve could raise interest rates later this year following another strong U.S. jobs report.

Spot gold fell to around $4,315 per ounce, while U.S. gold futures slipped below $4,350, extending Friday's sharp selloff.

The decline comes as rising Treasury yields and growing expectations of tighter monetary policy reduce the appeal of non-yielding assets such as gold. Markets are now pricing in a higher probability of a Fed rate hike before year-end after strong labor market data signaled continued economic resilience.

At the same time, geopolitical tensions intensified after Israel launched strikes on military targets in Iran, pushing oil prices more than $4 per barrel higher and reigniting inflation concerns.

While gold is traditionally viewed as a hedge against inflation and geopolitical uncertainty, the prospect of higher interest rates is currently outweighing safe-haven demand.

Analysts note that rising bond yields are increasing the opportunity cost of holding bullion, keeping pressure on precious metals despite escalating Middle East risks.

Other precious metals were also weaker, with silver and platinum declining, while palladium posted modest gains.

 Investor Takeaway

Gold is facing a difficult environment where higher interest rate expectations are outweighing safe-haven demand from geopolitical tensions. Investors will closely watch upcoming inflation data and Federal Reserve signals for clues on the metal's next major move.
 

By- Shahzad Ahmad 

(Market Analyst | Investor | Trader | Strategist)