Gold slips as fading US-Iran peace prospects reinforce Fed rate-hike bets

Gold prices extended losses on Wednesday after falling to a seven-month low in the previous session, as fading prospects of a permanent U.S.-Iran peace deal heightened inflation concerns and bolstered expectations of Federal Reserve rate hikes.

FUNDAMENTALS

Spot gold was down 0.6% at $3,981.69 per ounce, as of 0112 GMT, after ‌hitting its ⁠lowest level ⁠since last November in the previous session. U.S. gold futures for August delivery lost 1.1% to $3,994.40.

Dimming prospects for a near-term diplomatic breakthrough, Iran said it would not meet with senior U.S. envoys who travelled to the region following an outbreak of hostilities.


Iranian officials added that both sides must still resolve ceasefire terms signed ⁠two weeks ‌ago before addressing more complex issueson potential limits to its nuclear programme.

Federal Reserve Bank of Cleveland President ⁠Beth Hammack said on Tuesday it remains possible that she'll advocate for higher interest rates if inflation pressures fail to ease, underscoring a still-hawkish policy outlook.

Traders are pricing in roughly a 67% chance of a rate hike in September, according to the CME FedWatch Tool, reflecting firming expectations of tighter monetary policy.

Investors now await the June ADP ‌employment data, due later in the day, and nonfarm payroll figures on Thursday for further clues on Fed's rate path, which could shape near-term moves ⁠in bullion.

Meanwhile, an OMFIF survey showed more central banks plan to cut dollar allocations over the coming decade as political risks associated with the U.S. currency rise.

Spot silver fell 0.9% to $58.04 per ounce, platinum lost 0.9% to $1,537.78, and palladium inched 0.2% lower to $1,202.33.

DATA/EVENTS (GMT)

0800 EU S&P MFG Final PMI June 0900 EU HICP Flash YY June

0900 EU HICP-X F, E, A, T Flash YY, MM June 1345 US S&P Global Mfg PMI Final June

1400 US ISM Manufacturing PMI June