International gold prices experienced a decline on Monday, falling to their lowest point in more than two months, influenced by heightened expectations for U.S. interest rate hikes following robust employment data. Concurrently, a surge in global oil prices due to escalating geopolitical tensions in the Middle East has intensified market concerns regarding inflation prospects.
Market data indicates that as of 08:45 GMT on the 8th, the global spot gold price dropped by 0.9% to $4,290.66 per ounce, reaching the lowest level since March 23rd of this year. Last Friday, the spot gold price had already recorded a significant decline of over 3%. Additionally, the price for August gold futures on the New York Mercantile Exchange fell by 1.1% to $4,315.40 per ounce. Spot prices for other precious metals such as silver, platinum, and palladium also experienced varying degrees of decline.
Data previously released by the U.S. Bureau of Labor Statistics showed that non-farm payrolls increased by 172,000 in May, with April's figures revised upward to 179,000. This strong employment report has directly altered market expectations regarding the direction of the Federal Reserve's monetary policy. Data from the CME FedWatch Tool indicates that market expectations for a Fed rate hike by December of this year have surged dramatically from 45% a week ago to over 70%.
Driven by these rate hike expectations, the yield on the U.S. 10-year Treasury note rose to a two-week high on Monday. Analysts point out that although gold is typically viewed as a hedge against inflation, the anticipation of Fed rate hikes, which pushes Treasury yields higher, increases the opportunity cost of holding non-yielding assets like gold, thereby exerting significant downward pressure on its price.
On the geopolitical front, a new round of military strikes between Iran and Israel, coupled with Israel resuming attacks on Lebanon the previous day, caused international crude oil prices to surge by over $4 per barrel. The resulting inflation worries from soaring energy prices are putting pressure on global financial markets.
Market analysis firms note that reports on the U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) for May are scheduled for release this Wednesday and Thursday, respectively, followed by the Federal Reserve's Federal Open Market Committee (FOMC) meeting next week. Should this week's inflation data exceed expectations, or if the Fed signals a strongly hawkish stance in its policy communication, international gold prices could face further declines, potentially testing the psychological threshold of $4,000 per ounce.
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