Gold prices slipped for a third consecutive session on Tuesday as higher U.S. Treasury yields reduced the appeal of the non-yielding asset. At the same time, lingering tensions in the Middle East continued to fuel concerns about inflation and the outlook for interest rates.
Spot gold declined 0.2% to $4,319.98 per ounce by 0100 GMT, after touching its lowest level in more than two months during the previous session. U.S. gold futures for August delivery fell 0.4% to $4,344.30 per ounce.
Treasury yield climbed to its highest level in two weeks, raising the opportunity cost of holding gold and adding pressure on prices.
Geopolitical developments remained in focus after Iran and Israel announced they had stopped attacking each other following an appeal by U.S. President Donald Trump. However, Tehran cautioned that military action could resume if Israel continued strikes against Hezbollah targets in Lebanon.
Market sentiment was also influenced by expectations for U.S. monetary policy. Goldman Sachs forecast that the Federal Reserve would likely leave interest rates unchanged through 2026, with any rate cuts postponed until 2027, citing resilient economic growth and a strong labor market.
According to the CME FedWatch tool, traders are now assigning a probability of more than 70% to a Federal Reserve rate increase by December.
Meanwhile, Citi lowered its short term gold price target to $4,000 per ounce from $4,300, arguing that the metal’s recent rally may be difficult to maintain without sustained physical demand and amid expectations of higher U.S. interest rates.
Investment demand also showed signs of weakening. SPDR Gold Trust, the world’s largest gold-backed exchange traded fund, reported a 0.5% decline in holdings on Friday, bringing total assets to 929.62 metric tons.
Among other precious metals, spot silver dropped 0.6% to $67.84 per ounce, platinum edged down 0.2% to $1,750.33, while palladium gained 0.6% to $1,211 per ounce.
Investors are now awaiting key economic data, including Germany’s industrial production figures for April and U.S. industrial trade and existing home sales data scheduled for later in the day.