Gold dropped to multi-month lows on Monday as a broad rise in government bond yields across the United States, Europe and Japan increased pressure on non-yielding assets.
The bond market reacted to stronger-than-expected US labour data on Friday and increasing inflation concerns amid renewed geopolitical tensions in the Middle East and a rebound in oil prices.
This reinforced expectations of a more restrictive monetary policy stance.
In Japan, investors increasingly expect the Bank of Japan to raise interest rates. Meanwhile, the European Central Bank is widely expected to tighten its monetary policy at its upcoming meeting. At the same time, the Federal Reserve is forecast to raise interest rates later this year. Higher interest rates across major economies could create more challenging conditions for gold.
Looking ahead, investors will remain focused on geopolitical developments and central bank monetary policy signals. Any indication that the conflict could persist for longer may continue to support inflation expectations and keep pressure on gold. Nevertheless, ongoing central bank gold purchases are likely to provide a degree of support and help limit downside risks over the longer term.
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