Gold falls after weekly gain as Fed rate-hike concerns recede

[NEW YORK] Gold dropped after posting its first weekly advance since May on weakening expectations that the US Federal Reserve will hike interest rates.

Bullion fell as much as 1 per cent to around US$4,137 an ounce, having gained more than 2 per cent last week to snap a four-week run of losses.

Soft US jobs data and lower energy prices prompted traders to dial back bets on monetary policy tightening, with swap traders currently pricing around a 25 per cent chance of a rate hike at the Fed’s next meeting in July.

Oil edged lower on Monday, as more tankers moved through the Strait of Hormuz and Opec+ signalled it would boost crude supplies.

An apparent cooling in the US labour market and crude seeing its biggest quarterly drop since 2020 has eased fears that high inflation could prompt Fed chair Kevin Warsh to raise interest rates.

At a European Central Bank forum in Sintra, Portugal last Wednesday, Warsh said that “inflation risks have come down”. Higher borrowing costs are a headwind for non-yielding bullion.

“While lower oil prices have eased concerns over energy-driven inflation, markets continue to monitor broader price pressures stemming from AI-related investment demand and weather-related supply disruptions,” said Manav Modi, commodities analyst at Motilal Oswal Financial Services.

Meanwhile, US President Donald Trump and his allies have renewed a push to reshape the Fed after the Supreme Court last week blocked an effort to fire governor Lisa Cook. Top officials and outside allies are actively exploring ways to remove members of the central bank’s Board of governors in Washington to clear the way for more of the president’s own picks, according to people familiar with the matter.

Repeated challenges to the Fed’s independence by the Trump administration helped supercharge bullion’s rally through the latter months of 2025, as part of the so-called debasement trade – a bet on inflation and swelling debt burdens in developed economies.

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Spot gold declined 0.9 per cent to US$4,140.32 an ounce as of 10.12 am in New York. Silver edged down 1.0 per cent. Platinum was lower while palladium rose. The Bloomberg US dollar Spot Index, a gauge of the US currency, rose 0.2 per cent.