Gold futures fell to a more than nine-month low on Monday as bets on aggressive interest rate hikes by the Federal Reserve and a 20-year high against the U.S. dollar index weighed on safe-haven assets.
Gold futures for August delivery fell $10.60 to settle at $1,731.70 an ounce, down 0.6%. It was the lowest close for the most active contract since Sept. 29, 2021, FactSet data showed. September silver futures settled at $19.132 an ounce, down 10 cents or 0.5%.
Platinum futures for October delivery fell $22.10 to $860.70 an ounce, down 2.5%. Palladium futures for September delivery rose $15 to $2,171.60 an ounce, up 0.7%. Copper for September delivery was down 9 cents at $3.4305 a pound, down 2.6%.
Much of the fall in gold prices since peaking above $2,000 an ounce in 2022 has been the result of a stronger dollar and higher U.S. Treasury yields, as that has made gold less attractive to investors.
U.S. Treasury yields have recovered over the past few days after retreating from their year-to-date highs in mid-June. Meanwhile, the ICE U.S. dollar index DXY hit a new 20-year high of around 108, mainly due to a weaker euro against the dollar.
“Gold’s price action is largely driven by the U.S. dollar index, which has remained strong,” Naeem Aslam, chief market analyst at AvaTrade, said in a note. Friday’s U.S. nonfarm payrolls report The Fed’s hawkish monetary policy is supported by the jobs data, so “the next rate hike is likely to be 75 basis points, which means the dollar will strengthen further and gold prices may lose more luster.”
Traders eagerly await this week’s U.S. economic data, with the consumer price index due on Wednesday and the producer price index (ppi) on Thursday.
Edward Moya, senior market analyst at Oanda, said in a new market report: “Inflation is in a tug-of-war with gold, which is trying to hold the line. Wednesday’s fiery inflation report will underpin the Fed’s tug of war later this month. Time to aggressively hike expectations and push up expectations for the September meeting,” he said. “The focus on Wall Street is whether the Fed will tip the U.S. economy into recession, and the king dollar may continue to be popular, which is a difficult environment for gold.”
Gold remains vulnerable and could test selling pressure at the $1,700 level, with the $1,670 area as key support, Moya said.
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