WASHINGTON (dpa-AFX) - Extending the previous five sessions of losses, gold prices have tumbled on Wednesday as U.S. dollar strengthens due to persisting concerns of a near-term high U.S. interest rates while investors monitored the developments in U.S.-Iran negotiations and decline in crude oil prices with cautious optimism.
Front Month Comex Gold for August month delivery has slumped by $134.20 (or 3.23%) to $4,015.20 per troy ounce.
Front Month Comex Silver for August month delivery has nosedived by $3.955 (or 6.35%) to $58.345 per troy ounce.
Last week, the U.S. Federal Reserve announced holding the interest rates in the 3.50% to 3.75% range citing inflationary pressures.
The Federal Open Market Committee's Summary of Economic Projections (or Dot Plot) indicating where the interest rates may travel in the future, hinted at a more hawkish stance.
Agreeing that inflation would stay elevated, nine Fed officials projected a rate hike through 2026 while eight expected no change. Of note, only one member speculated a rate cut.
On the economic front, the U.S. Mortgage Bankers Association of America revealed that the Purchase Index decreased to 169.70 on June 19 from 170.80 of the previous week.
A high U.S. interest-rate regime makes gold-buying costlier for overseas investors.
According to CME Group's FedWatch Tool, investors are betting on a 34.20% chance of a quarter-basis-point interest rate hike in the upcoming Federal Reserve's meeting on July 28-29 while the bets for the rates being held at the current level are at a 65.80%.
Expectations of any rate cut have vanished from the market.
The U.S. dollar index was last seen trading at 101.55, up by 0.16 (or 0.16%) today.
In the U.S. stock markets, a wider selloff in technology and semiconductor shares triggered a two-day slide. Observers attributed this to concerns of a possible AI-bubble.
Investors trimmed their position on gold to offset the losses in stock portfolios causing further decline in gold prices.
The data on U.S. Personal Consumption Expenditures which is the Fed's preferred inflation measure is due for tomorrow. Economists are awaiting the numbers to get a glimpse on the monetary policy outlook of the Fed.
Last Wednesday, U.S. President Donald Trump and Iran's President Masoud Pezeshkian signed a Memorandum of Understanding to extend the prevailing ceasefire for a 60-day period. Both nations agreed to discuss all critical issues in this interim time period and find ways to end their hostilities.
According top priority, Iran reopened the Strait of Hormuz while the U.S. lifted its naval blockade on Iranian ports.
The first round of talks to arrive at a framework ended in Switzerland with technical round negotiations set to go on through this week.
Contradictory claims on Iran's readiness to allow inspectors from International Atomic Energy Agency inside Iran kept investors confusing, shadowing the positivity from easing Middle East tensions.
Yesterday, Trump messaged through Truth Social that Iran agreed to highest level nuclear inspections long into the future. Trump affirmed that if they had not agreed to this, negotiations would not have taken place.
However, Iranian media quoted the spokesperson for Iran's Foreign Ministry Esmaeil Baghaei and reported that there were no detailed discussions on the nuclear issue.
Gold has already plunged over 4.00% since last week's Fed meeting and nearly 5.00% down year-to-date, and 20.00% below its record-high value in January.
Since the start of the war, major global central banks tightened their monetary policies due to oil-price-linked inflationary concerns. Iran shut the Strait of Hormuz, preventing oil and energy transit from Arab nations. As a result, gold's traditional safe-haven appeal diminished.
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