Gold Hovers Near 7-Month Low On Firm Treasury Yields, Fed Rate Outlook

Gold fell 1% on Wednesday, hovering near a seven-month low hit in the previous session, pressured by higher Treasury yields, while fading prospects of a permanent U.S.-Iran peace deal kept concerns over inflation and Federal Reserve rate hikes elevated.

Spot gold was down 1% at $3,969.03 per ounce, as of 0747 GMT. On Tuesday, bullion slipped to $3,942.99 per ounce, its lowest point since last November.

US gold futures for August delivery lost 1.4% to $3,982.90 on Wednesday.

Gold recorded its largest quarterly drop since 2013 and posted its fourth consecutive monthly loss on Tuesday, as tensions in the Middle East fuelled inflation concerns and bolstered Fed rate-hike expectations.

"It looks like the pressure from higher yields is what's getting gold lower. The US dollar is also a touch higher at the same time, which kind of confirms what's going on," said Ilya Spivak, head of global macro at Tastylive.

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The dollar strengthened, making greenback-priced bullion more expensive for holders of other currencies, while yields on the benchmark 10-year U.S. Treasury note advanced higher.

Federal Reserve Bank of Cleveland President Beth Hammack said on Tuesday it remains possible that she will advocate for higher 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 for 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 payrolls data on Thursday for further cues on Fed's rate path.

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

Spot silver fell 1.8% to $57.53 per ounce and platinum slipped 0.6% to $1,541.95, its lowest level since last November. Palladium slid 1.4% to $1,187.09.