Gold Tops $4,570 but Heads for Worst Monthly Drop Since 2008

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.

Gold held above $4,000 an ounce in volatile trade on Tuesday, but was still on track for a fourth consecutive monthly decline amid Middle East uncertainties and expectations that the Fed will raise interest rates this year. Markets continue to price in at least one rate hike by the Fed this year, with the first potentially coming as soon as September, while some investors are betting on additional hikes thereafter. The precious metal has declined about 11% this month and roughly 14% this quarter. Investors are now awaiting the latest US monthly employment report for fresh clues on the policy outlook. Meanwhile, US and Iran are scheduled to resume peace talks in Doha, Qatar later today, although prospects for a lasting ceasefire remain unclear. A major sticking point remains after Tehran reiterated its plan to oversee traffic through the Strait of Hormuz even if Oman decides not to take part.