Gold Falls for the Third Day Under Pressure from Prospects of U.S. Rate Hike

SadaNews - Gold has declined for the third day as traders assess signals that the Federal Reserve may move to tighten monetary policy while also following the peace talks between the United States and Iran.

Spot gold fell to about $3970 per ounce after declining 2% over the previous two sessions, reaching its lowest level since November.

On Tuesday, Beth Hammack, President of the Federal Reserve Bank of Cleveland, stated that she does not see much evidence that interest rates are constraining the economy, and that the U.S. central bank may need to raise them to keep inflation low at its 2% target.

In the Middle East, American negotiators Jared Kushner and Steve Witkoff held positive discussions with regional leaders in Qatar, and technical talks with Iran are progressing, according to a senior administration official.

During the second quarter, gold fell 14%, marking its worst performance since 2013. After hitting a record high in January, the metal was impacted by speculation that the Federal Reserve may raise interest rates this year to deal with stubborn inflation, despite the declines seen in energy costs following the temporary peace agreement between the United States and Iran.

Higher borrowing costs are a pressure factor on non-yielding metals.

Interest Rate Pressures and Technical Analysis Haunt Gold

Before U.S. employment data is released later this week, numbers indicated resilience in the economy. There was little change in job openings in May, suggesting that demand for labor remains steady alongside a recent recovery in job growth. This provides the Federal Reserve with greater leeway to maintain interest rates while assessing the inflation trajectory.

Technically, gold is also facing signs of weakness as the metal's 200-day moving average recently fell below its 50-day counterpart. This pattern, widely known as the "death cross," is seen by some investors as a signal of a potential long-term bearish trend.

Lee Sheng Gan, a strategist at Exness, stated that "the death cross has reinforced the bearish outlook and ongoing selling pressure." However, Gan noted that it is a lagging indicator and may not capture short-term rebounds if sentiment improves.

As of 11:00 AM in Singapore, spot gold fell 0.7% to $3980.03 per ounce, while the Bloomberg Dollar Spot Index, a measure of the U.S. currency, rose by 0.2%. Silver, which plummeted 22% in the second quarter, dropped 1.4% to $57.77 per ounce. Platinum and palladium also declined.

Silver Price

Silver prices were also recorded near $57 per ounce.