Gold Adds to Losses on US Rate Hike Fears

Old prices continued losses on Monday as expectations of a US rate hike grew after a solid jobs data, while ongoing conflicts in the Middle East pushed oil prices higher and fuelled inflation concerns.

Spot gold dropped 0.4% to $4,313.11 an ounce by 0302 GMT. Prices plummeted almost 3% on Friday to the lowest level since March 24.

U.S. gold futures for August delivery fell 0.7% to $4,336.30.It is all based on the hawkishness that the market has started to put on the Fed futures,” said Kelvin Wong, senior market analyst at OANDA, adding that higher Treasury yields were putting further pressure on gold.

The benchmark 10-year U.S. Treasury note yield climbed after spiking to a two-week high in the previous session, raising the opportunity cost of keeping non-yielding metal.

Israel said it hit military targets in western and central Iran on Monday, even as U.S. President Donald Trump allegedly advised Israeli Prime Minister Benjamin Netanyahu to hold off on any strikes.

Fuelling fears of higher inflation and interest rates, oil prices surged by more than $3 a barrel.

Gold is viewed as a hedge against inflation, but increasing interest rates tend to press the non-yielding metal.

The U.S. economy created a solid number of jobs for a third straight month in May, suggesting the labour market was gaining steam after floundering last year and providing the central bank greater leeway to keep rates stable amid inflation rising due to the Iran war.

“The new jobs number showed the labour market is roughly in balance and near full employment,” Fed President Beth Hammack of Cleveland said Friday, adding that ongoing high inflation may mean the Fed would have to hike rates soon to curb it.

Spot silver declined 0.4% to $67.56 an ounce, platinum eased 0.5% to $1,767.15 and palladium was unchanged at $1,225.66.