Gold Prices Fall Over 1% Amidst Economic Uncertainty and Interest Rate Hike Expectations

Kathmandu. On Tuesday, the price of gold in the international market has seen a decline of more than one percent. Amidst the ongoing uncertainty in West Asia, the expectation that the US may increase interest rates to control the high price rise has pushed the price of gold towards its biggest monthly decline since October 2008.

Today, the price of spot gold has decreased by 1.5 percent to $3,956.92 per ounce. With this decline, the price of gold has already decreased by 12.7 percent this month alone, which is the fourth consecutive month of decline. Similarly, the futures price of US gold for the upcoming August month has also decreased by 1.7 percent to $3,969.30 per ounce.

Due to the Iran war, the rapid increase in energy prices has strengthened the fear of inflation and the possibility of interest rate hikes. Because of this, gold, a precious metal, appears to be heading towards its first quarterly decline since 2024 and its biggest decline since the June quarter of 2013.

According to Carrex analyst Edward Meyer, high inflation, high expectations of interest rate hikes, and a strong US dollar are currently dominant, overshadowing other traditional factors that boost gold prices. Although gold is generally seen as a safe investment against inflation, its attractiveness decreases in an environment of high interest rates.

Traders in the global market expect the US central bank, the Federal Reserve (Fed), to raise interest rates three times this year. According to the CME FedWatch Tool, there is a 64 percent possibility of an interest rate hike in September. Investors are currently awaiting the June ADP employment and non-farm payroll data to be released this week to get more clarity on the Fed's next steps. As the US dollar is strengthening for the second consecutive month, it has become expensive for holders of other currencies to buy gold.

On the other hand, investors are closely watching the outcome of the Iran-US talks to be held in Doha this week, although Iran has stated that no meeting has been scheduled yet. For this reason, the price of crude oil is also heading towards its sharpest quarterly decline since 2020.

Analyst Meyer estimates that gold will trade in the range of $3,500 to $4,400 per ounce in the second half of the year. Along with gold, the prices of other precious metals have also declined, with spot silver falling 2 percent to $57.13 per ounce, platinum falling 1.1 percent to $1,557.21, and palladium falling 0.4 percent to $1,208.17.