Gold futures traded 6% lower for the month on Tuesday, marking the precious metal’s first monthly loss this year, as growing expectations for an interest rate increase continue to dampen the yellow metal’s appeal.
On Tuesday, gold slated for June delivery fell $1.10, or 0.1%, to $1,212.70 an ounce.
On Friday, gold shed 0.5% after Federal Reserve Chairwoman Janet Yellen said it’s appropriate to gradually and cautiously raise the interest rate in the next few months given the improving economic outlook.
Higher interest rates tend to boost demand for the U.S. dollar, dampening investor interest in dollar-priced gold and similar commodities as it makes makes them more expensive.
Interest rate increases can also weigh on the precious yellow metal as it does not generate interest, sending buyers scouring for investments that offer higher yields.
Early this month, gold futures rallied to a 15-month high of $1,295.80. Barely three weeks later, the yellow metal is now hovering in the $1,200-level.
Other metals traded mostly lower on Tuesday and were likewise on track for losses on the month.
Despite the short-term setback for the yellow metal, however, many analysts remain optimistic on gold’s long-term prospects.