Spot gold prices fell by 0.2% to $4,319.98 per ounce as of 0100 GMT, marking a decline to a more than two-month low. The drop is attributed to rising yields on the benchmark 10-year U.S. Treasury note, which reached a two-week high, increasing the opportunity cost of holding gold.
U.S. gold futures for August delivery also saw a decrease of 0.4% to $4,344.30 per ounce.
The increase in Treasury yields comes amidst expectations of higher U.S. interest rates, with traders pricing in a more than 70% chance of a Federal Reserve rate hike by December, according to the CME FedWatch tool. Goldman Sachs has projected that the U.S. Federal Reserve will maintain interest rates through 2026, with potential rate cuts delayed until 2027 due to stronger economic activity and job growth.
Citi has adjusted its near-term gold price target, lowering it to $4,000 per ounce from $4,300, citing the anticipation of higher U.S. interest rates and the difficulty in sustaining bullion's recent strength without strong physical demand. Additionally, SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, reported a 0.5% drop in its holdings to 929.62 metric tons.
In other precious metals, spot silver fell by 0.6% to $67.84 per ounce, platinum decreased by 0.2% to $1,750.33, while palladium saw a rise of 0.6% to $1,211.
The geopolitical landscape remains tense, with Iran and Israel announcing a halt to attacks on each other following an appeal from U.S. President Donald Trump. However, Tehran has warned of resuming hostilities if Israel continues its strikes on Hezbollah in Lebanon.
Background
Gold prices are often influenced by interest rates and geopolitical tensions. Rising U.S. Treasury yields increase the opportunity cost of holding non-yielding assets like gold, while geopolitical tensions can drive safe-haven demand. The current market dynamics reflect these influences, impacting investor strategies.
Looking ahead, market participants will closely monitor the Federal Reserve's policy decisions and geopolitical developments, which could further influence gold prices and investor sentiment in the coming months.
