HG MARKETS: 

Gold (XAU/USD) remains under selling pressure, trading near the $4,060 level during the early European session on Monday. The precious metal continues to struggle as investors weigh easing geopolitical concerns surrounding the United States and Iran alongside growing expectations that the US Federal Reserve could maintain a hawkish monetary policy. Market participants are also shifting their attention toward Thursday’s highly anticipated US Nonfarm Payrolls (NFP) report, which is expected to provide fresh clues about the future direction of interest rates. US officials indicated that both countries have agreed to “stand down for now” after recent military exchanges near the strategically important waterway. The development has slightly reduced demand for safe-haven assets such as gold, contributing to the metal’s downside pressure.

Despite the diplomatic efforts, uncertainty in the Middle East remains elevated. Iranian Foreign Minister Abbas Araghchi emphasized that responsibility for the Strait of Hormuz rests solely with Tehran, while another Iranian official warned that any attempt to bypass Iran’s preferred shipping route could trigger renewed tensions and further escalation. Any deterioration in the geopolitical situation could quickly revive safe-haven demand and fuel concerns about higher global inflation.

At the same time, expectations of tighter US monetary policy continue to weigh on gold prices. Rising geopolitical risks could increase inflationary pressures, encouraging the Federal Reserve to keep interest rates elevated for longer. Since gold is a non-yielding asset, higher interest rates reduce its appeal compared to interest-bearing investments. According to the CME FedWatch Tool, traders are currently pricing in nearly a 59.7% probability of a Federal Reserve rate hike as early as September 2026.

Looking ahead, investors will closely monitor Thursday’s US labor market data, particularly the Nonfarm Payrolls report, for additional guidance on the Fed’s policy outlook. Economists expect the US economy to have added approximately 114,000 jobs in June, while the unemployment rate is forecast to remain unchanged at 4.3%. Stronger-than-expected employment figures could reinforce expectations for higher interest rates and extend pressure on gold, while weaker data may provide some support for the precious metal.