Gold Falls as Rate-Hike Fears Mount Ahead of U.S. Inflation Data

Gold prices fell on Tuesday amid a broader market sell-off, as investors grew more cautious ahead of key U.S. inflation reports and rising expectations that the Federal Reserve could still raise interest rates later this year. Spot gold declined 0.7% to $4,298.75 an ounce after dropping more than 1% earlier in the session. U.S. gold futures for August delivery fell 0.9% to $4,323.90.

Market sentiment weakened across assets, with the tech-heavy Nasdaq Composite and the S&P 500 both posting losses. Analysts said the move reflected a wider risk-off mood rather than gold-specific weakness alone. Bob Haberkorn, senior market strategist at RJO Futures, said traders were nervous and that the broad retreat from risk assets was contributing to pressure on gold. He added that gold and silver may remain under strain until the Federal Reserve provides clearer direction on interest rates.

Attention is now centered on this week’s U.S. inflation data, including the May consumer price index on Wednesday and the producer price index on Thursday. These reports are likely to influence expectations for the Fed’s next policy moves. After stronger-than-expected U.S. jobs data last week, traders have shifted focus to whether inflation is still running hot enough to keep borrowing costs elevated.

Commerzbank said a stronger-than-expected inflation reading could push gold prices lower in the near term, while also increasing the chance of a recovery later in the year if the Fed ultimately holds rates steady. According to the CME FedWatch tool, traders are currently pricing in about a 70% chance of a Fed rate hike in December.

Geopolitical developments in the Middle East also affected broader markets, with signs of a possible peace deal easing tensions and helping push oil prices lower. Iran and Israel said they had halted attacks on each other after an appeal from President Trump. Lower crude prices can ease inflation concerns, while higher oil prices typically support inflation and may keep interest rates elevated for longer. Since gold does not yield interest, it often comes under pressure when rates rise or are expected to stay high.

Other precious metals also fell. Spot silver dropped 3.2% to $65.98 an ounce, platinum declined 1.1% to $1,736.08, and palladium lost 2.5% to $1,234.93.