BAKU, Azerbaijan, July 12. Gold was headed for
its steepest quarterly loss since 2013 on Tuesday as investors
recalibrated expectations for U.S. interest rates, with persistent
inflation concerns and rising oil prices reinforcing the case for
further Federal Reserve tightening.


This was reflected in the statement published by the KAP
DEPO.


According to the KAP DEPO, spot gold rose 0.2% to $4,046.2 an
ounce by late trading, but remained down 11.2% since the start of
April, putting the metal on track for its first quarterly decline
since 2024.


The retreat comes as higher crude prices, fueled by renewed
tensions in the Middle East, have stoked concerns that inflation
could remain elevated for longer, reducing the likelihood of
near-term policy easing.


While bullion is typically seen as a hedge against inflation and
geopolitical turmoil, higher borrowing costs tend to undermine its
appeal by raising the opportunity cost of holding non-yielding
assets.


Treasury yields remained elevated, offering investors stronger
returns in fixed-income markets and adding pressure on gold.


According to CME FedWatch data, traders are pricing in a 65%
probability of a Federal Reserve rate hike in September, with
markets now anticipating up to three increases before year-end.







Focus is now shifting to upcoming U.S. labor market data, which
could provide fresh clues on the Fed’s next move and shape
expectations for the pace of tightening.


Still, structural demand from central banks continues to offer
support. A recent OMFIF survey showed reserve managers intend to
gradually reduce their exposure to the U.S. dollar over the next
decade while increasing allocations to gold, citing ongoing
geopolitical uncertainty and diversification needs.


The latest correction in gold prices reflects a broader shift in
global monetary expectations rather than a collapse in underlying
demand. With bullion falling below $4,000 per ounce for the first
time since November and extending losses of more than 20% from
January’s record highs, markets are increasingly adjusting to the
prospect of higher U.S. interest rates for longer, due to Trend's analysis.


The main pressure comes from the Federal Reserve’s hawkish
stance, which has strengthened the U.S. dollar and kept Treasury
yields elevated. This has reduced the appeal of non-yielding assets
such as gold, prompting investors to rotate into fixed-income
markets. At the same time, downward revisions by major financial
institutions, including Goldman Sachs and Deutsche Bank, have added
to bearish sentiment, reinforcing expectations that the metal could
remain under pressure in the near term.


Still, the longer-term picture remains more balanced. Continued
purchases by central banks, which expanded at the fastest pace in
more than a year during the first quarter, suggest that
institutional demand for gold as a reserve diversification tool
remains intact. This could help cushion further declines even as
speculative flows weaken.


"For Uzbekistan, the correction carries wider macroeconomic
significance. Gold remains the country’s largest export commodity
and accounts for the bulk of its international reserves, which
reached $70.6 billion in May. Recent Central Bank data showed the
value of gold reserves fell by $156 million during the month as
prices weakened, despite an increase in physical holdings. This
highlights Uzbekistan’s exposure to global bullion markets, where
prolonged price declines could weigh on export earnings, reserve
valuations, and the pace of foreign currency accumulation," the
Trend's analysis
said.