Gold prices extended their decline on Wednesday, continuing a sharp sell-off that saw the precious metal drop to its lowest level in seven months during the previous session.
The downward pressure intensified as market participants reassessed the geopolitical landscape, with fading prospects for a permanent peace deal between the United States and Iran reigniting concerns about supply chain disruptions and higher energy costs.
5% to $3,957.74 per ounce in recent trading, putting the metal on track for a fourth consecutive monthly decline.
The shift in geopolitical sentiment has directly impacted monetary policy expectations.
With the likelihood of a diplomatic resolution diminishing, traders are pricing in a higher risk of persistent inflation, which in turn reinforces bets that the Federal Reserve may need to raise interest rates or maintain a hawkish stance for longer than previously anticipated.
This repricing of rate expectations has provided a tailwind for the US dollar, adding further headwinds for gold, which trades inversely to the greenback and offers no yield.
According to Handelsavisen archive data, spot gold had already declined 1.5% to $3,957.74 per ounce in recent trading, putting the metal on track for a fourth consecutive monthly decline.