Gold prices fell for a third consecutive session on Thursday, hovering near a more than seven-month low as growing expectations of further U.S. interest rate hikes strengthened the dollar and reduced the appeal of the precious metal.
Spot gold slipped 0.5 percent to US$3,982.49 an ounce by mid-session in European trading, remaining below the key US$4,000 threshold it breached a day earlier for the first time since November 2025. U.S. gold futures for August delivery were also lower, edging down 0.3 percent to US$3,997.60 an ounce.
The decline comes amid a sharp reassessment of U.S. monetary policy expectations following last week’s Federal Reserve meeting, where policymakers signaled a more hawkish stance than markets had anticipated.
Investors now see a 66 percent probability that the U.S. central bank will raise interest rates in September, according to CME FedWatch data. Higher interest rates tend to reduce demand for non-yielding assets such as gold, while also supporting the U.S. dollar.
The dollar climbed to its strongest level in more than 13 months on Thursday, making gold more expensive for holders of other currencies and further weighing on demand.
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“The Fed’s hawkish shift, which has led to a repricing of rate hike expectations, remains the dominant driver of gold’s weakness,” said Nikos Tzabouras, senior market analyst at online trading platform Tradu.com.
Analysts said investor sentiment toward gold has deteriorated significantly in recent weeks as markets increasingly favor higher-yielding assets.
Gold has lost more than six percent of its value since the Federal Reserve’s latest policy meeting and is now trading more than 28 percent below its record high of US$5,594.82 per ounce reached in January.
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Beyond monetary policy concerns, bullion has also faced pressure from investment outflows and a broader shift toward equities, particularly technology stocks benefiting from the rapid expansion of artificial intelligence-related investments.
Exchange-traded funds backed by gold have seen continued withdrawals as investors rotate capital into sectors perceived to offer stronger growth prospects.
“ETF outflows and the rotation into equities driven by the AI boom are definitely factors weighing on the precious metal,” Tzabouras said.
However, he noted that such market dynamics are cyclical and do not necessarily undermine the long-term case for gold as a store of value and hedge against economic uncertainty.
Market participants are now awaiting the release of the U.S. Personal Consumption Expenditures (PCE) index, the Federal Reserve’s preferred measure of inflation, later on Thursday. The data could provide fresh clues about the direction of interest rates and influence expectations ahead of the Fed’s next policy meetings.
A stronger-than-expected inflation reading could reinforce the case for tighter monetary policy, potentially putting further downward pressure on gold prices.
At the same time, investors continue to monitor geopolitical developments, which traditionally support demand for safe-haven assets such as gold.
Attention has focused on a U.S.-backed proposal involving Israel and Lebanon, under which Israeli forces would hand over parts of territory seized during past conflicts with Hezbollah to the Lebanese army. While geopolitical tensions often provide support for bullion, traders said monetary policy concerns currently remain the dominant market driver.
Other precious metals also posted losses on Thursday. Spot silver fell 0.3 percent to US$57.26 per ounce, while platinum declined 0.4 percent to US$1,571.95.
Palladium, however, bucked the broader trend, rising 1.3 percent to US$1,181.46 per ounce.
With the dollar maintaining its strength and investors increasingly pricing in the possibility of higher U.S. borrowing costs, analysts said gold may remain under pressure in the near term, particularly if upcoming economic data reinforces expectations of further Federal Reserve tightening.
