Gold heads for worst monthly fall since 2008 as rate hike bets strengthen

Gold prices fell more than 1% on Tuesday and were headed for their steepest monthly decline since October 2008, as expectations of US interest rate hikes outweighed safe-haven demand linked to Middle East tensions.

Spot gold dropped 1.5% to $3,956.92 per ounce by 0221 GMT, taking its monthly decline to 12.7%. US gold futures for August delivery fell 1.7% to $3,969.30.

Bullion was also on track for its first quarterly loss since 2024 and its biggest quarterly fall since the June quarter of 2013.

The decline came as markets priced in tighter US monetary policy, with higher inflation and a stronger dollar reducing demand for gold. Traders are expecting three Federal Reserve rate hikes this year and are pricing in about a 64% chance of a rate increase in September, according to the CME FedWatch Tool.

A stronger dollar, which was set for a second monthly gain, also made gold more expensive for buyers using other currencies.

Investors are now waiting for the June ADP employment report and nonfarm payrolls data due later this week, which are expected to provide further signals on the Federal Reserve’s policy path.

Oil prices were headed for their sharpest quarterly decline since 2020 as investors watched for developments around possible Iranian and US talks in Doha, although Iran said no meeting had been scheduled.

Among other precious metals, spot silver fell 2% to $57.13 per ounce, platinum declined 1.1% to $1,557.21 and palladium slipped 0.4% to $1,208.17.

Silver was set for its sharpest monthly loss since September 2011, while gold and silver were both headed for their biggest quarterly drops since 2013. Platinum was on course for its worst month since 2008 and its steepest quarterly decline since January 2020.

Marex analyst Edward Meir expects gold to trade between $3,500 and $4,400 in the second half of the year.