Key Points:
- Gold fell 0.6% at $1,670 per ounce as the US dollar regained some lost ground.
- Bullion prices rose 3% on Friday as the dollar fell nearly 2% after US jobs data raised hopes.
- Gold is considered an inflation hedge, but rising interest rates reduce appeal of the non-yielding asset.
Gold prices fell from a three-week high reached in the previous session on Monday as the US dollar regained some ground, making greenback-priced bullion more expensive for holders of other currencies.
As of 0712 GMT, spot gold was down 0.6% at $1,670.09 per ounce. Bullion prices rose 3% on Friday as the dollar fell nearly 2% after US jobs data raised hopes that the Federal Reserve will be less aggressive in raising interest rates in the future. Gold futures in the United States fell 0.2% to $1,673.40.
Investmentals’ market analyst Brian Stevens says it’s not uncommon for prices to retrace against a large move from the previous session, and gold is pulling back as the dollar gradually rises.
The dollar index recovered some lost ground, rising 0.2%. Four Federal Reserve policymakers indicated on Friday that they would still consider a smaller rate hike at their next policy meeting.
Investors will now turn their attention to the US inflation data, which is due later this week.
The data is expected to shed some light on the Fed’s rate-hike decision in the upcoming December meeting. US inflation data has the potential to make or break gold, according to Stevens.
While markets currently favor a 50-basis-point rate hike, as mentioned by Stevens, a strong inflation report would likely increase the odds to 75 basis points, sending the dollar higher and gold lower.
Bullion is considered an inflation hedge, but rising interest rates reduce the appeal of the non-yielding asset. Spot gold may retest $1,682 resistance.
On the physical front, the World Gold Council reported in a Friday note that a stable local gold price, a weak RMB, and economic uncertainty boosted gold sales in cities like Beijing and Shanghai in October.
Spot silver was down 1.8% at $20.47, while platinum was down 1.3% at $948.57. Palladium prices increased 1.1% to $1,882.83.
