By: Economy Middle East

Precious metals are facing significant headwinds as shifting economic data alters the outlook for monetary policy. Gold prices extended losses on Monday on rising fears of a U.S. rate hike after a strong jobs report, while renewed hostilities in the Middle East pushed oil prices higher and fanned inflation concerns. The market decline has been swift, as spot gold fell 0.35 percent to $4,314.74 per ounce by 09:03 UAE time, following a 3 percent drop on Friday that pushed prices to their lowest level since March 24. U.S. gold futures for August delivery were down 0.64 percent at $4,337.32.

The rise in U.S. Treasury yields is further complicating the environment for investors. The yield on the benchmark 10-year U.S. Treasury note rose after jumping to a two-week high in the previous session, increasing the opportunity cost of holding non-yielding bullion.

In the local UAE market, current gold rates remain structured across different carats. The price for 24-carat gold stands at AED521.75, while 22-carat gold is positioned at AED483.00. Meanwhile, 21-carat gold reaches AED463.25, followed by 18-carat gold at AED397.00, and 14-carat gold at AED309.75.

The 72 percent probability

Global markets are closely monitoring the interplay between regional conflict and central bank policy. Israel said it struck military targets in western and central Iran on Monday, even after U.S. President Donald Trump reportedly told Israeli Prime Minister Benjamin Netanyahu to refrain from further attacks. This instability has sent shockwaves through energy markets, as oil prices rose more than $3 a barrel, deepening concerns over inflation and interest rate hikes. While gold traditionally serves as an inflation hedge, its non-yielding nature makes it vulnerable to rising rates.

Economic strength in the United States is providing the Federal Reserve with greater flexibility to address these challenges. The U.S. economy posted a third straight month of strong job gains in May, confirming the labour market was gaining traction after stumbling last year and giving the central bank more room to keep rates steady amid rising inflation due to the Iran war. Current market expectations reflect this sentiment, as markets are pricing in a Federal Reserve rate hike before year-end, with a 72 percent chance of a move by December, according to CME Group’s FedWatch tool. Supporting this outlook, Cleveland Fed President Beth Hammack said on Friday that new jobs numbers show the labour market was roughly in balance and near full employment, while continued high inflation may require the Fed to raise rates soon to contain it.

Across the broader metals sector, performance has been mixed: spot silver rose 0.07 percent to $67.77 per ounce, platinum lost 2.21 percent to $1,758.15, and palladium fell 0.33 percent to $1,203.00.