Dollar Recovery Pressures Gold Prices
Spot gold traded lower on Monday as the U.S. dollar regained ground following last week’s sharp decline, with investors continuing to assess the outlook for U.S. interest rates.
After rebounding from an eight-month low last week, gold lost momentum as the dollar recovered from levels close to a two-week low.
By 11:43 GMT, spot gold had fallen 0.5% to $4,154.14 per ounce, while gold futures gained 1.0% to $4,166.76 per ounce.
David Morrison, Senior Market Analyst at Trade Nation, said:
“The greenback has bounced back this morning, knocking gold lower. Time will tell if this drop proves to be short-lived, or more significant.”
Gold Posts First Weekly Gain Since May
Despite Monday’s decline, gold recorded its first weekly advance since mid-May after climbing more than 2% last week.
The rally followed weaker-than-expected U.S. nonfarm payrolls data, which prompted investors to reduce expectations that the Federal Reserve would raise interest rates again this year.
Inflation and labour market conditions remain the two primary factors guiding the Fed’s monetary policy decisions. Persistent inflation combined with a resilient jobs market increases the likelihood of tighter policy.
Higher interest rates typically weigh on gold because they raise the opportunity cost of holding non-yielding assets. This dynamic has been one of the main factors limiting bullion’s performance throughout the year after it reached record highs in January.
Other Precious Metals Also Retreat
Other precious metals also moved lower after posting solid gains last week.
Spot silver declined 1.1% to $61.7430 per ounce, while spot platinum slipped 0.4% to $1,635.31 per ounce.
Markets Await Federal Reserve Minutes
The U.S. Dollar Index rose 0.1% on Monday as investors reassessed the likelihood of further Federal Reserve tightening.
Although the dollar weakened last week, it remains close to the 13-month highs reached in June as stubborn U.S. inflation continues to cloud the outlook for interest rates.
Attention now turns to the minutes from the Federal Reserve’s June meeting, which are expected to provide additional insight into policymakers’ thinking.
While lower oil prices have helped ease some inflation concerns, markets continue to monitor price pressures linked to the rapid expansion of artificial intelligence infrastructure as well as the economic impact of rising global temperatures.
Federal Reserve officials indicated during their June meeting that persistent inflation could still justify at least one additional interest rate increase this year.