Gold prices declined in Asian trading on Monday as renewed concerns over inflation and the prospect of higher United States interest rates outweighed the safe-haven appeal of the precious metal, despite signs of easing tensions between the US and Iran.
Spot gold fell 0.8 per cent to $4,055.50 an ounce by 01:14 GMT, while U.S. gold futures slipped 0.7 per cent to $4,069.25 an ounce.
The decline came after the United States and Iran exchanged strikes over the weekend, raising concerns over regional stability and briefly straining a fragile ceasefire.
However, sentiment improved following reports that both countries had agreed to halt hostilities and hold further talks later this week.
Despite the diplomatic breakthrough, bullion remained under pressure as investors focused on the outlook for US monetary policy. Gold recently touched its lowest level in nearly eight months amid growing expectations that the US Federal Reserve could raise interest rates later this year.
A recent peace agreement between Washington and Tehran has also helped ease fears of energy-driven inflation, with oil prices retreating sharply to pre-conflict levels over the past week. The decline in energy prices has reduced demand for gold as a traditional hedge against inflation.
At the same time, the precious metal continued to face headwinds from a stronger U.S. dollar and elevated Treasury yields.
According to CME FedWatch data, financial markets are pricing in more than a 30 per cent chance that the Federal Reserve will raise interest rates by the end of 2026.
Expectations of tighter monetary policy have been reinforced by stronger-than-expected US inflation data and hawkish signals from policymakers following the Federal Reserve’s June meeting.
Other precious metals also traded lower. Spot silver fell 1.3 per cent to $58.4435 an ounce, while spot platinum declined 1.1 per cent to $1,622.34 an ounce.
Higher interest rates generally weigh on gold and other non-yielding assets, as they increase the opportunity cost of holding metals instead of interest-bearing investments such as government bonds.
