Gold Holds Losses on Inflation Worries

Gold traded below $4,500 per ounce on Tuesday after declining in the previous session, pressured by stalled peace negotiations between the US and Iran that kept inflation risks and interest rate expectations at the forefront. On Monday, Iranian media reported that Tehran had suspended communications with Washington in response to Israeli attacks in Lebanon. Meanwhile, President Donald Trump said discussions are still ongoing and suggested that a memorandum of understanding with Iran to reopen the Strait of Hormuz could be reached as early as next week. Markets are currently factoring in a Federal Reserve rate hike before year-end after US inflation accelerated, driven in large part by the Middle East conflict. Investors are now awaiting this week’s US monthly jobs report and comments from Fed officials for additional clues on the future path of monetary policy.

Gold prices gave up early gains to fall to $4,470 per ounce in the first trading session of June, nearing their lowest level since late March. Escalating oil prices, driven by renewed Iran-US strikes and Iran’s decision to halt communications with the US in protest over Israel’s attacks on Lebanon, intensified inflation worries and strengthened expectations that central banks will keep interest rates higher for longer. Over the weekend, both sides exchanged proposals to revise a draft agreement to extend the ceasefire and reopen the Strait of Hormuz, though it remains unclear if any significant headway was made. Market participants now assign a roughly 60% probability to at least one US rate hike by the end of the year. Investors are turning their focus to this week’s US jobs data and upcoming remarks from Fed officials. In his first public comments since his term as Fed Chair ended on May 15, Governor Jerome Powell cautioned against the dangers of a politicized central bank.

Gold steadied above $4,500 an ounce on Monday following a volatile week, as efforts to secure a longer-term ceasefire agreement between the US and Iran showed limited signs of progress. Over the weekend, Washington and Tehran exchanged proposals seeking amendments to a draft accord that would extend the ceasefire and reopen the Strait of Hormuz, though it remained uncertain whether the negotiations were moving closer to a resolution. President Donald Trump also reiterated his call for Iran to halt its nuclear program and fully restore the strait’s status as an open international waterway. Gold has faced headwinds since late February as the Middle East conflict drove energy prices sharply higher, fueling concerns about inflationary pressures and the prospect of interest rate hikes. Investors are now awaiting the latest US monthly jobs report later this week, which could offer fresh insight into labor market strength and the likely path of Federal Reserve policy.