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Gold prices fell on Tuesday, nearing $4,100 an ounce, as investors reassessed expectations for US interest rates amid growing pressure on global markets due to tighter monetary policy and rising bond yields. The precious metal declined by about 2%, trading between $4,100 and $4,120 an ounce, extending its recent losses amid waning demand for non-yielding assets.
Gold is moving below its long-term average.
Gold fell below its 200-day moving average, which is near $4,468 an ounce, indicating continued technical pressure on prices. This decline comes amid growing investor belief that the Federal Reserve may be forced to maintain its tight monetary policy for a longer period, or even raise interest rates again if inflationary pressures persist.
High interest rates usually have a negative impact on gold, since the precious metal does not generate a return, making bonds and fixed-income financial instruments more attractive to investors.
Rising bond yields are putting pressure on gold.
The US bond market has seen a significant rise in yields in recent days, as expectations for US monetary policy have been reassessed. The yield on the two-year Treasury note climbed to 4.23%, its highest level in over a year, signaling growing market expectations for continued Federal Reserve tightening. These moves followed recent comments from Federal Reserve Chairman Kevin Warsh, who reaffirmed the central bank’s commitment to combating inflationary pressures, raising investor concerns about the possibility of another interest rate hike.
Recent projections from Federal Reserve members also showed that nine out of 18 officials expect interest rates to rise before the end of the year, compared to no expectations of a rate hike last March.
Markets await September meeting
Futures pricing indicates a higher probability of another interest rate hike at the upcoming September meeting, a clear shift compared to previous expectations that suggested a possible rate cut might be discussed during 2026. Investors believe that continued inflationary pressures could push the central bank to adopt a more hawkish policy, which increases pressure on gold and interest-sensitive assets.
A sell-off hits global markets
The pressure wasn’t limited to gold; global stock markets experienced a broad sell-off amid growing concerns about rising interest rates. The Nasdaq fell by about 1.3% on Monday, while shares of major technology companies declined, with Google, Amazon, and Broadcom all dropping by more than 4%. The pressure extended to Asian markets, with South Korea’s Kospi index plunging by more than 10%, triggering a 20-minute trading halt.
Chipmakers also suffered heavy losses, with SK Hynix shares falling by about 12%, while Samsung shares dropped by more than 9%.
In futures trading, indicators pointed to continued pressure, with S&P 500 futures down about 1% and Nasdaq futures down about 2%.
Gold: Between safe haven and high interest rates
Gold currently finds itself caught between two opposing forces. On the one hand, global market volatility is bolstering demand for safe-haven assets, while on the other, rising interest rates and bond yields are diminishing the precious metal’s appeal. At present, the impact of monetary policy and higher yields appears to be outweighing defensive demand, which explains the continued downward pressure on gold prices.
In the coming days, attention will remain focused on upcoming US inflation data and statements from Federal Reserve officials, as these are the factors that will most influence the direction of gold during the second half of the year.
