Gold extends losses on US interest rate-hike fears

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.

Spot gold fell 0.2% to $4,319.09 per ounce by 0429 GMT. Prices fell about 3% on Friday, hitting the lowest since March 24.

U.S. gold futures for August delivery were down 0.5% at $4,343.20.

“It is all based on the hawkishness that the market has started to place on the Fed futures,” said Kelvin Wong, a senior market analyst at OANDA, adding that higher Treasury yields were further pressuring gold.

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.

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.

Oil prices rose more than $3 a barrel, deepening concerns over inflation and interest rate hikes.

While gold is seen as a hedge against inflation, higher interest rates tend to weigh on the non-yielding metal.

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.

Markets are pricing in a Federal Reserve rate hike before year-end, with a 72% chance of a move by December, according to CME Group’s FedWatch tool.

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.

Spot silver was steady at $67.86 per ounce, platinum lost 0.5% to $1,767.42, and palladium was unchanged at $1,225.67.