Gold prices extended losses in Asian trading on Monday, sliding to their weakest level in 11 weeks as firmer U.S. labour-market data supported assumptions that the Federal Reserve will maintain elevated interest rates. At the same time, a rebound in oil prompted renewed inflation concerns, compounding pressure on bullion.
Spot gold was last down 0.4% at $4,312.08 an ounce by 23:00 ET (03:00 GMT), marking its lowest settlement since March 23. Meanwhile, U.S. Gold Futures for August delivery slipped 0.7% to $4,337.10 per ounce.
The metal suffered a steeper drop on Friday, when it fell more than 3% as investors re-evaluated the outlook for U.S. monetary policy following stronger-than-expected labor market figures. Data released on Friday showed the U.S. economy added 172,000 jobs in May, well above economists' forecasts, while the unemployment rate remained unchanged at 4.3%.
That report led traders to pare back expectations for near-term Federal Reserve rate cuts. The shift boosted Treasury yields and strengthened the U.S. dollar, reducing demand for assets that do not pay interest such as gold.
"Despite the lack of consistent messaging in the labour market data, we now have a rate hike fully priced at the December FOMC meeting," ING analysts said in a recent note.
Adding to downward pressure on bullion, oil prices jumped after Iran launched several rounds of missiles toward Israel in response to an Israeli strike on the outskirts of Beirut, stoking concerns of a wider regional escalation and testing a fragile ceasefire. Brent crude climbed toward $96 a barrel, while U.S. crude traded above $93, intensifying worries that higher energy costs could complicate the global inflation outlook.
Although gold often draws safe-haven demand during episodes of geopolitical tension, the metal was facing stronger headwinds from a firmer dollar amid expectations of Fed policy tightening. The U.S. Dollar Index was largely flat in Asian trade on Monday after surging to a two-month high in the previous session.
Other precious metals were also under pressure. Silver declined 0.8% to $67.32 per ounce, and platinum eased 0.6% to $1,770.58 per ounce.
Market context and implications
With Treasury yields and the U.S. dollar rising on the back of robust labor market data, non-yielding assets like gold have been repriced lower as investors weigh the likelihood of a more prolonged period of restrictive monetary policy. Concurrently, an uptick in oil prompted by renewed hostilities in the Gulf has reintroduced upside risks to the inflation outlook, an additional headwind for bullion.