Gold prices moved lower on Monday as a stronger US dollar and expectations of further Federal Reserve monetary tightening weighed on the precious metal.
Spot gold declined 0.7% to $4,345.76 an ounce by 06:58 ET (10:58 GMT), while gold futures fell 1.0% to $4,383.10 an ounce.
The decline came after the Federal Reserve raised interest rates last week for the first time since 2023 and indicated that additional increases could follow before the end of the year as policymakers seek to contain inflation linked to energy costs.
Fed Policy Expectations Remain Central to Gold Trading
Investors continued to assess the implications of the Federal Reserve’s latest decision and the possibility of another rate increase in December.
“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,” ING analysts wrote in a note.
Higher interest rates tend to present a challenge for gold because it does not pay interest, making income-generating assets comparatively more attractive.
Nevertheless, bullion recorded gains over the previous week, partly supported by a decline in crude oil prices.
ING noted that recent remarks from Federal Reserve officials had reinforced expectations of a prolonged period of restrictive monetary policy.
“Comments from Fed officials reinforced concerns that inflation remains elevated, supporting expectations that rates will stay higher for longer,” the analysts said.
According to CME FedWatch, market pricing indicated an approximately 88% probability of another Federal Reserve rate increase as soon as December.
That probability represents traders’ expectations rather than a commitment by the central bank.
Stronger Dollar Makes Gold More Expensive for Overseas Buyers
The US dollar index advanced 0.1% to 100.30, adding to the pressure on gold.
The index tracks the dollar’s performance against a basket of major currencies.
When the US currency strengthens, dollar-denominated commodities such as gold become more expensive for buyers holding other currencies, potentially weighing on demand.
The combination of a firmer dollar and expectations of higher interest rates contributed to Monday’s decline in bullion.
Falling Oil Prices Offer Some Relief From Inflation Concerns
Crude oil extended its recent losses on Monday as investors considered the possibility of diplomatic progress 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 that supply conditions could ease.
Lower crude prices may help reduce energy-related inflation pressures, although Federal Reserve officials have continued to express concern about elevated inflation.
For gold, the immediate market focus remains on the outlook for US interest rates, movements in the dollar and developments in energy markets.
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