Gold prices declined on Monday as the US dollar strengthened and investors assessed the possibility of further interest rate increases by the Federal Reserve before the end of 2026.
At 06:58 ET (10:58 GMT), spot gold was down 0.7% at $4,345.76 per ounce, while gold futures fell 1.0% to $4,383.10 per ounce.
The decline followed the Federal Reserve’s first interest rate increase since 2023, with policymakers signalling that additional tightening could be necessary to address inflation driven partly by higher energy costs.
Federal Reserve Outlook Pressures Gold
Analysts at ING attributed the early-week decline to changing expectations for US monetary policy.
“Gold edged lower at the start of the week as investors assessed the implications of the Federal Reserve’s first rate hike since 2023 and the prospect of further policy tightening,” the analysts said in a research note.
Higher interest rates can reduce the appeal of gold because the precious metal does not generate interest income. Rising yields can make interest-bearing assets relatively more attractive.
Despite the Fed’s decision, gold recorded a gain over the previous week, supported partly by declining oil prices.
However, the prospect of additional monetary tightening remained a concern for investors.
“Comments from Fed officials reinforced concerns that inflation remains elevated, supporting expectations that rates will stay higher for longer,” ING analysts said.
According to the CME FedWatch tool, traders were pricing in an approximately 88% probability of another Federal Reserve interest rate increase as early as December.
This figure reflects market-implied expectations at the time of the report rather than a confirmed policy decision.
Dollar Strength Adds to Pressure on Bullion
The US dollar index, which measures the currency against a basket of major international counterparts, increased 0.1% to 100.30.
A stronger dollar generally makes gold more expensive for buyers using other currencies, potentially reducing demand.
The combination of a firmer dollar and expectations of further US rate increases weighed on bullion during Monday’s trading session.
Oil Declines Amid Hopes for Iran Diplomacy
Crude oil prices extended their recent losses on Monday as investors monitored potential diplomatic efforts concerning the conflict involving Iran ahead of this week’s United Nations General Assembly.
Reports of improving oil flows from the Gulf also contributed to expectations of increased supply.
Lower energy prices could help ease some inflationary pressures, although Federal Reserve officials continued to signal concern about the broader inflation outlook.
Gold’s near-term direction remains sensitive to changes in US interest rate expectations, dollar movements and developments affecting energy prices.