Gold drops more than 1% as rising Middle East tensions add to rate-hike fears
GLD•Other metals also decline
Among other metals, spot silver XAG= slipped 2.3% to $58.47 per ounce, platinum XPT= dipped 0.2% to $1,624.82, and palladium XPD= was down 0.5% to $1,270.69.
Fed and U.S. data in focus this week
According to the CME Group's FedWatch Tool, traders currently see a 69% chance that the U.S. central bank will raise interest rates in September.
On Tuesday, Fed Chair Kevin Warsh is expected to deliver his first monetary policy testimony before Congress. Market participants will scan his remarks for clues on the outlook for rates.
The U.S. government is due to release key data this week, including the Consumer Price Index, Producer Price Index, and retail sales reports for June and weekly jobless claims.
Oil rally and rate fears weigh on bullion
"I'm quite bearish on gold in the short term. Oil prices are rallying because of the Middle East conflict, and there is potential for policy tightening from the Federal Reserve. This is bad news for zero-yielding assets like gold," said Fawad Razaqzada, market analyst at Forex.com.
"If oil prices continue to push higher, gold prices could break down and potentially head towards the $3,800 level initially and possibly to $3,500 over time if the selling pressure accelerates," he added.
U.S. and Iranian forces exchanged heavy missile and drone attacks over the weekend and into Monday, with Tehran saying it had struck U.S. military facilities across the Gulf and kept the Strait of Hormuz closed, driving oil prices higher. O/R
Higher oil prices can fuel inflation by raising energy and transportation costs across the economy, potentially prompting central banks to keep interest rates higher for longer or even raise them further to curb price pressures.
