Gold extended its decline on Monday, falling below $4,400 an ounce as investors assessed the implications of stronger-than-expected U.S. employment figures for the Federal Reserve’s September interest-rate decision.
Spot gold was down 0.8% at $4,396.29 an ounce at 02:34 ET (06:34 GMT), while gold futures declined by the same percentage to $4,441.85.
Other precious metals also moved lower. Silver fell 0.8% to $65.71 an ounce and platinum declined 0.6% to $1,811.42. The U.S. Dollar Index was broadly unchanged at 99.07.
Markets price higher probability of September rate increase
Monday’s decline followed a 1% fall in gold on Friday after U.S. employment data showed 162,000 jobs were added in August, above expectations. The unemployment rate was unchanged.
Markets subsequently placed the probability of a Federal Reserve rate increase at its September 15-16 meeting at around 60%.
Higher interest rates can affect demand for gold by increasing the relative returns available from interest-bearing assets.
The U.S. dollar also strengthened on Friday. Because gold is priced in dollars, movements in the U.S. currency can affect its cost for investors using other currencies.
Gold finished the previous week at $4,429 an ounce, a weekly decline of 0.6%, after moving above and below the $4,400 level.
Attention now turns to U.S. producer price data scheduled for Thursday and consumer price figures due on Friday. The reports will provide further information on inflation ahead of the Federal Reserve’s September meeting.
Hormuz developments put energy prices in focus
Markets were also assessing developments in the Strait of Hormuz and their potential effect on energy prices.
Iran said it had targeted three oil tankers in the strait and several vessels linked to the United States in retaliation for U.S. attacks on vessels during the weekend.
Brent crude was trading around $97 a barrel, putting additional focus on the potential implications of energy prices for inflation.
Gold has remained within a relatively narrow trading range since recovering from levels around $4,000 an ounce in July. Last week, the metal fell below its 200-day moving average of approximately $4,526.
IG senior market analyst Tony Sycamore said the move had not altered his medium-term assessment that gold established a base around the late-June low of $3,942.
Sycamore continues to favour buying pullbacks and expects gold eventually to move towards $5,000 an ounce.
Leave a Reply