Gold edges down on stronger dollar as traders mull Fed rate plans

Bengaluru — Gold prices ticked down in light trade on Monday pressured by a stronger dollar, as investors assessed the path ahead for interest rates after hawkish remarks from US Federal Reserve policymakers.

Spot gold fell 0.1% to $1,955.49 per ounce by 2.49am GMT (4.49am). US gold futures eased 0.2% to $1,967.60.

The dollar index held firm, making bullion less attractive for buyers holding other currencies.

Fed officials struck a hawkish tone in their first comments since the central bank held the policy interest rate steady at its meeting last week.

“Gold has spent the majority of June between $1,935-$1,970, and with no obvious catalyst on the horizon, traders prefer to trade the ranges and not fully commit to a breakout,” said Matt Simpson, senior market analyst at City Index.

US stock markets will be closed on Monday for the Juneteenth holiday.

Bullion posted a small weekly fall last week as traders ramped up bets for a July rate hike after the Fed’s hawkish pause after 10 consecutive hikes.

Though gold is considered a hedge against inflation, interest rate hikes raise the opportunity cost of holding non-yielding bullion.

Traders are now pricing in an about 72% chance of a Fed rate hike in July, according to the CME Fedwatch tool.

“Historically, gold prices can outperform at end of Fed tightening cycle. While opportunity cost of holding gold has risen, we believe it should not be long to see real yields ease lower at some stage. This can be supportive of gold prices,” said OCBC FX strategist Christopher Wong.

Investors now await Fed Chair Jerome Powell’s Congressional testimonies on Wednesday and Thursday for further cues on future rates.

Spot silver fell 0.2% to $24.098 per ounce, platinum dropped 0.4% to $977.61, while palladium was steady at $1,412.10. 

Reuters