Gold prices declined on Monday, partly due to the strength of the U.S. dollar following indications from U.S. Federal Reserve officials that interest rates would remain elevated for an extended period. However, the downward movement was limited as investors awaited upcoming inflation data.
Spot gold slipped by 0.2% to $1,921.30 per ounce, while U.S. gold futures held steady at $1,941.60. Gold was consolidating its position after failing to sustain prices above $1,930 per ounce the previous week. If the Fed decides to raise rates, gold could face further pressure, possibly dropping towards the psychologically significant level of $1,900.
Higher interest rates tend to discourage investments in non-interest-bearing assets like gold, which is priced in U.S. dollars. Despite keeping the benchmark rate unchanged the previous week, Fed officials expressed uncertainty about whether the battle against inflation was over, hinting at the possibility of more rate hikes.
The U.S. dollar remained at a six-month high, and 10-year Treasury yields were near their highest point in 16 years. Investors were eagerly anticipating the release of the personal consumption expenditures (PCE) price index on September 29, which is the Fed’s preferred inflation gauge.
Reflecting the cautious sentiment among investors, the SPDR Gold Trust, the world’s largest gold-backed ETF, reported a drop in holdings to their lowest level since January 2020.
(Source: Reuters | CNBC)
