Gold price drops for third day as jitters over US rate outlook worsen

Gold fell for a third day Wednesday as signals the Federal Reserve may move to tighten policy aided the dollar and traders tracked US-Iran talks.

Spot bullion fell below $4,000 an ounce after slumping 2% over the prior two sessions, with prices hitting the lowest since November. Fed Bank of Cleveland President Beth Hammack said on Tuesday that she is not seeing a lot of evidence interest rates are restraining the economy, and the US central bank may need to raise them to keep inflation down to its 2% goal.

Further clues on the outlook for US rates may come later Wednesday, with new Fed Chair Kevin Warsh due to speak at the European Central Bank’s annual symposium in Sintra, Portugal. Last month, Warsh used his debut press conference to make clear the central bank won’t tolerate high inflation.

In the Middle East, meanwhile, US negotiators Jared Kushner and Steve Witkoff had positive discussions with regional leaders in Qatar and technical talks with Iran are moving ahead, according to a senior administration official.

Gold sank 14% in the second quarter, capping the worst performance since 2013. After setting a record in January, the metal has been hurt by speculation that the Fed may hike rates this year to tackle sticky inflation, despite the declines seen in energy costs following the interim US-Iran peace deal. Higher borrowing costs are a headwind for non-yielding metals.

Ahead of US employment data later this week, figures pointed to resilience in the economy. Job openings were little changed in May, suggesting that labor demand remains stable alongside a recent pickup in payroll growth. That gives the Fed more room to hold rates while assessing the path of inflation.

On the technical front, gold is also contending with signs of weakness after the precious metal’s 200-day moving average recently dropped below its 50-day counterpart. The pattern — a so-called death cross — is seen by some investors as a sign a long-term downtrend is forming.

The death cross “reinforced the bearish outlook and sustained selling pressure,” said Li Xing Gan, a strategist consultant to Exness. Still, it may not capture short-term rebounds should sentiment improve, Gan said.

Spot gold traded 0.6% lower at $3,983.07 an ounce at 9:20 a.m. in London as the Bloomberg Dollar Spot Index, a gauge of the US currency, rose 0.2%. Silver  — which collapsed by 22% in the second quarter — slipped 1.3% to $57.86 an ounce. Platinum also fell, hitting the lowest since November, as palladium declined.

(By Yihui Xie)