June 10 (Reuters) – Gold prices fell more than 3% on Wednesday as fears of a wider U.S.-backed war with Iran stoked concerns about interest rate hikes to curb rising inflation, with investors focusing on key U.S. data for clues on the monetary policy path.
Spot gold was down 3.5% at $4,111.95 per ounce by 2:26 p.m. EDT (1826 GMT), its lowest level since March 23.
U.S. gold futures for August delivery settled 3.6% lower at $4,133.3.
“Markets are in desperate need of some good news after strong payrolls on Friday and President (Donald) Trump’s threat earlier this morning that Iran ‘will pay the price’ for not negotiating a deal,” said Tai Wong, an independent metals trader.
Trump said on Wednesday that Iran had taken too long to negotiate a deal and would now “have to pay the price.” The president later said the U.S. would attack Iran “very hard” if no peace deal is finalized.
Iran launched missile and drone attacks on U.S. bases in Jordan, Kuwait and Bahrain in retaliation for American strikes on Iranian targets around the Strait of Hormuz.
Bullion has been under pressure since the start of the war in late February, as surging oil prices fuel fears of inflation and higher interest rates.
While gold is seen as a hedge against inflation, higher rates typically weigh on the non-yielding metal.
Traders are currently pricing in about a 67% chance of a U.S. interest rate hike in December, according to CME Group’s FedWatch tool. [FEDWATCH]
The U.S. Labor Department on Wednesday reported that the Consumer Price Index excluding food and energy items gained 0.2% on a monthly basis after rising 0.4% in April.
The release on Thursday of the U.S. Producer Price Index will provide investors more data to gauge the Federal Reserve’s monetary policy stance.
“Despite recent price consolidation, inflation, central bank buying and currency debasement concerns continue to support gold,” Paul Wong, a market strategist at Sprott Asset Management, said in a note.
Spot silver fell 0.8% to $64.83 per ounce, platinum dropped 2.6% to $1,681.88, and palladium rose 0.7% to $1,230.41.
(Reporting by Anushree Mukherjee in Bengaluru; Editing by Paul Simao and Leroy Leo)
