Gold prices weakened on Monday, back
toward a 29-month low hit on Friday, as the dollar and Treasury
yields firmed on expectations the U.S. Federal Reserve will
deliver a steep interest rate hike when it meets this week.
Spot gold was down 0.3% at $1,670.72 an ounce by 1:48
p.m. ET (1748 GMT), holding above its lowest since April 2020
hit on Friday.
U.S. gold futures settled 0.3% lower at $1,678.20.
“(Gold) is still hanging around its lows and a big part of
this is anticipation of the Fed announcement on Wednesday,” said
Daniel Pavilonis, senior market strategist at RJO Futures,
adding that higher Treasury yields were also pressuring prices.
The Fed, at the conclusion of its two-day policy meeting on
Wednesday, is expected to raise interest rates by 75 basis
points to combat stubbornly-high inflation, with markets even
seeing a 20% chance for a 100 bps increase.
Concerns about surging inflation have also prompted other
central banks to tighten monetary policy.
Although gold is considered a hedge against inflation,
higher interest rates lift the opportunity cost of holding
The dollar held close to two-decade highs, making
greenback-priced bullion more expensive for overseas buyers.
Benchmark 10-year U.S. Treasury yields rose to
their highest in over 11 years.
“What is driving the hesitation for scaling into a long-term
position with gold is that investors are not convinced that even
when the Fed pauses, that might not guarantee they are done
hiking (interest rates),” Edward Moya, senior analyst with
OANDA, said in a note.
Elsewhere, silver lost 1.2% to $19.32 an ounce, while
platinum rose 1% to $915.91 and palladium gained
4.1% to $2,222.19.
The bullion market in London – the world’s biggest trade
center for physical gold – was closed for Queen Elizabeth’s
funeral which limited trade volumes on Monday.
(Reporting by Kavya Guduru in Bengaluru; Editing by Jonathan
Oatis and Mark Potter)