On Monday, gold prices fell due to fears of a US rate hike following a solid jobs report. Meanwhile, increasing tensions in the Middle East raised oil prices and fueled inflation concerns. According to Kelvin Wong, a senior market analyst at OANDA, the market’s hawkishness on Fed futures, combined with increasing Treasury yields, is putting pressure on gold prices.
The yield on the benchmark 10-year US Treasury note increased from a two-week high in the previous session, raising the potential cost of keeping non-yielding metal. Israel reportedly bombed military sites in western and central Iran on Monday, despite US President Donald Trump’s warning to Israeli Prime Minister Benjamin Netanyahu not to escalate the attacks.
Oil prices increased by more than $3 a barrel, raising concerns about inflation and interest rate increases. While gold is viewed as a hedge against inflation, rising interest rates tend to weigh on the non-yielding metal.
In May, the US economy produced a third consecutive month of solid job increases, indicating that the labor market is recovering traction after floundering last year. This gives the central bank greater room to keep rates stable, despite rising inflation due to the war in Iran.
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