Gold retreated on Monday as a firmer dollar and expectations of another Federal Reserve rate hike weighed on the metal. Spot gold fell to $4,345.76 an ounce while traders priced in an 88% chance of a December hike, even as falling oil prices tied to Iran diplomacy offered some support.
Gold prices slipped on Monday, pressured by a firmer dollar as investors weighed the prospect of further Federal Reserve interest rate hikes later this year. By 06:58 ET (10:58 GMT), spot gold had fallen 0.7% to $4,345.76 an ounce. Gold futures dropped 1.0% to $4,383.10 an ounce over the same window.
Fed rate hike bets build
Last week the Fed increased rates and hinted at more to come before year end, as policymakers try to quell energy-driven inflation. Higher rates can weigh on non-yielding assets like gold, though the metal still rose last week, helped in part by a drop in oil prices.
Comments from Fed officials reinforced concerns that inflation remains elevated, supporting expectations that rates will stay higher for longer, ING analysts said in a note: "rates will stay higher for longer". Traders are now pricing in about an 88% probability that the Fed will hike rates again as soon as December, according to CME FedWatch.
Dollar firms, oil extends its decline
Against this backdrop, the U.S. dollar index ticked up 0.1% to 100.30, tracking the greenback against a basket of global peers. A stronger dollar can dent gold's appeal by making it less attractive for overseas buyers.
The decline in crude extended into Monday, fueled by hopes for diplomatic efforts in the Iran war ahead of this week's United Nations General Assembly meeting, as well as reports of improving Gulf oil flows. That drop in oil prices was itself a factor behind gold's gain the prior week, even as rate-hike expectations built.
Source: Investing.com (Ambar Warrick contributed reporting)
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