Gold Approaches March-Lows

Gold prices fell below $4,500 per ounce on Wednesday, edging closer to the March lows touched last week, as expectations grew that central banks may need to adopt a more hawkish stance and keep interest rates higher for longer. Sentiment was also weighed by continued uncertainty over a US-Iran agreement to end the conflict. At the same time, oil prices extended their gains, further stoking concerns about inflationary pressures. In the US, recent labor market data point to an acceleration in employment growth, consistent with earlier ADP and JOLTS reports. As a result, markets now ECB is expected to raise borrowing costs next week, with traders also pricing in another 25-basis-point hike in September. Although gold is typically viewed as a hedge against inflation, it tends to lose appeal as a non-yielding asset when interest rates are high.

Gold prices fell below $4,500 per ounce on Wednesday, extending losses from earlier in the week as stronger-than-expected US labor market data reinforced expectations that the Federal Reserve may keep interest rates elevated for an extended period. Data released on Tuesday showed US job openings surged in April to their highest level in nearly two years, while layoffs declined, pointing to continued resilience in the labor market. Investors are now focused on Friday’s closely watched nonfarm payrolls report for further clues on the trajectory of monetary policy. Meanwhile, ongoing uncertainty surrounding US-Iran peace negotiations contributed to higher oil prices, fueling concerns about inflation and strengthening the case for a more restrictive Fed stance. Still, President Donald Trump stated that talks remain underway, while reports suggest Iranian officials are reviewing a “final text” that could be submitted to the US as negotiations continue.

Gold climbed back above $4,500 per ounce on Tuesday, recovering from the previous session’s losses as a pullback in oil prices helped temper inflation concerns, even as US-Iran peace negotiations remained deadlocked. On Monday, Iranian media reported that Tehran had suspended communications with Washington in response to Israeli attacks in Lebanon. Meanwhile, President Donald Trump said talks are still ongoing and indicated that a memorandum of understanding with Iran to reopen the Strait of Hormuz could be reached as soon as next week. Despite the easing in oil prices, markets continue to price in a Federal Reserve rate hike before year-end after US inflation accelerated, largely driven by the Middle East conflict. Investors are now awaiting Tuesday’s JOLTS job openings report ahead of the closely watched US monthly employment data on Friday for further insight into the Fed’s policy outlook.