Gold Price Falls as Fed Rate Hike Fears and U.S.-Iran Tensions Weigh on Bullion

Gold prices declined during Asian trading on Monday as investors weighed renewed geopolitical tensions in the Middle East alongside growing expectations that the U.S. Federal Reserve could raise interest rates later this year. While the United States and Iran reportedly agreed to halt military attacks and continue diplomatic talks, lingering uncertainty surrounding inflation and monetary policy continued to pressure the precious metal.

Spot gold slipped 0.8% to $4,055.50 per ounce by 01:14 GMT, while gold futures fell 0.7% to $4,069.25 per ounce. The decline extended last week's losses, when bullion dropped to its lowest level in nearly eight months as investors shifted focus toward stronger U.S. economic data and the possibility of tighter monetary policy.

Although reports indicated that Washington and Tehran had agreed to stop exchanging strikes and resume negotiations later this week, the fragile nature of the ceasefire kept financial markets cautious. At the same time, easing concerns over energy supply disruptions pushed oil prices back to pre-conflict levels, reducing fears of inflation fueled by higher crude prices.

Despite the temporary improvement in geopolitical sentiment, gold continued to face significant headwinds from a stronger U.S. dollar and elevated Treasury yields. Higher bond yields increase the opportunity cost of holding non-yielding assets such as gold, making the precious metal less attractive compared with interest-bearing investments.

Market expectations for tighter monetary policy also remained a major factor. According to CME FedWatch data, traders are now pricing in more than a 30% probability that the Federal Reserve will implement another interest rate hike before the end of 2026. Recent U.S. inflation figures and hawkish signals from the Fed's June policy meeting have reinforced concerns that policymakers may need to keep borrowing costs higher for longer to contain persistent price pressures.

Other precious metals also traded lower during the Asian session. Spot silver declined 1.3% to $58.4435 per ounce, while spot platinum fell 1.1% to $1,622.34 per ounce, reflecting broad weakness across the metals market as investors adjusted to rising rate expectations.

Looking ahead, traders will closely monitor developments in U.S.-Iran negotiations, upcoming U.S. economic data, Federal Reserve commentary, Treasury yields, and movements in the U.S. dollar. These factors are expected to remain the primary drivers of gold prices and the broader precious metals market in the near term.