Gold prices continued to decline on Wednesday, following a drop to a seven-month low in the prior session. The diminishing likelihood of a lasting U.S.-Iran peace agreement has intensified inflation worries and strengthened anticipations of Federal Reserve interest rate increases. Spot gold was down 0.6% at $3,981.69 per ounce, as of 0112, after hitting its lowest level since last November in the previous session. U.S. gold futures for August delivery declined by 1.1%, settling at $3,994.40. Dimming prospects for a near-term diplomatic breakthrough, Iran announced its decision not to engage with senior U.S. envoys who travelled to the region in the wake of escalating hostilities.

Iranian officials indicated that both parties must first settle the ceasefire terms established two weeks ago before delving into the more intricate matters concerning potential restrictions on its nuclear program. Federal Reserve Bank of Cleveland President Beth Hammack stated on Tuesday that it remains a possibility she will support higher interest rates if inflationary pressures do not subside, highlighting a continued hawkish stance on policy. Market participants are assigning approximately a 67% probability to a rate increase in September, as indicated by the CME FedWatch Tool, which underscores the strengthening anticipation of a more restrictive monetary policy.

Investors are currently anticipating the June ADP employment data, scheduled for release later today, as well as the nonfarm payroll figures on Thursday. These data points are expected to provide additional insights into the Federal Reserve’s interest rate trajectory, which may influence short-term movements in bullion. Meanwhile, a survey conducted by OMFIF indicated that a growing number of central banks intend to reduce their dollar allocations in the upcoming decade, driven by increasing political risks linked to the U.S. currency. Spot silver declined by 0.9% to $58.04 per ounce, while platinum experienced a similar decrease of 0.9%, settling at $1,537.78. Palladium saw a modest drop of 0.2%, reaching $1,202.33.