FX.co ★ Gold Holds Losses on Rate Hike Concerns

Gold hovered near $4,100 an ounce on Tuesday after tumbling 4% in the previous session, as persistent uncertainty surrounding US–Iran negotiations kept oil prices elevated and intensified pressure on the Federal Reserve to tighten policy further to rein in inflation. Oil extended its gains after Iranian officials reportedly voiced doubts about reaching an agreement before the US midterm elections in November, following President Donald Trump’s rejection of Tehran’s latest proposal.

US Treasury yields climbed to new multi-year highs on rising inflation concerns and expectations of additional rate hikes, undermining demand for non-yielding assets such as gold. Futures markets now imply roughly a 70% chance of a Fed rate increase in October, after the central bank delivered its first hike in three years earlier this month.

Investor focus is turning to this week’s US economic releases, notably Wednesday’s PCE inflation data and Friday’s nonfarm payrolls report, for further guidance on the Fed’s policy trajectory.