Gold Extends Decline

Gold slipped below $4,000 an ounce on Wednesday, trading near its lowest level in almost eight months as strong US economic data underscored the economy’s resilience and reinforced expectations that the Federal Reserve will raise interest rates this year. The latest JOLTS report showed job openings climbed to a two-year high, while analysts expect another solid increase in June non-farm payrolls. Meanwhile, recent core inflation readings remained well above the Fed’s 2% target. Markets are now pricing in at least one Fed rate hike this year, with the first potentially coming as early as September. Investors also awaited updates from the ongoing US-Iran peace talks in Qatar amid hopes for a lasting ceasefire agreement, although the two sides were not expected to hold direct talks.

Gold was at $4,030 per ounce on Tuesday, holding near their lowest in nearly eight months as restrictive monetary policy by the Fed was combined with a reversal of the dollar debasement trade. Gold was set to drop 11% in Q2, its worst quarter in decades. Strength in recent economic data consolidated a backdrop that supports the hawkish view of a large portion of FOMC members. The JOLTS pointed to the highest number of job openings in two years and analysts have penciled another sharp month of non-farm payroll gains in June. On top of that, the latest core inflation prints remained departed further from the Fed's 2% target. The aggressive pullback for gold was aligned with the elevated yields for Treasury notes and bonds, favoring coupon-bearing assets instead of bullion. Fed Chairman Warsh announced the pending creation of task forces to evaluate the need for the central bank's large balance sheet, setting the stage for the bond-selling that he has campaigned for previously.

Gold held at $4,020 an ounce on Tuesday, near its weakest level since November 2025, as a firm dollar and expectations of US interest rate hikes kept pressure on the metal. Bullion was down 11% for the month, heading for a fourth consecutive monthly decline, and down around 14% this quarter, the first quarterly loss since 2024 and the steepest drop since Q2 2013. Rising energy prices, driven by the Middle East conflict, have erased expectations of Federal Reserve rate cuts this year, with traders now pricing in a near 65% chance of a September hike. Although gold is traditionally seen as an inflation hedge, higher interest rates tend to weigh on the non-yielding asset. Attention now shifts to upcoming US employment data, including nonfarm payrolls, and remarks by Fed Chair Kevin Warsh due Wednesday for clues on monetary policy. Meanwhile, investors continued to monitor the prospects for renewed US-Iran diplomacy, though Iran dismissed reports of talks in Doha this week as unfounded.