Gold prices touched their lowest in over 10 months today, dragged down by expectations that a possible U.S. rate hike this week would curb demand for the safe-haven asset.
Spot gold hit its lowest since Feb. 5 at $1,153.93 an ounce, before rising 0.1 percent on the day to $1,159.20 an ounce by 0309 GMT. It fell about 1 percent on Friday.
U.S. gold futures were also at 10-month lows, easing to $1,161.20 per ounce.
“The market is pessimistic on gold. Monetary policy dominates gold at this point of time. The Fed is going to tighten its grip. The interest rate hike is now written on the wall,” said Mark To, head of research at Hong Kong’s Wing Fung Financial Group.
“What concerns most people is the change in monetary policy in 2017 and whether there will be any influence of Donald Trump on Janet Yellen,” said To, who expects further downside in prices below $1,100 and towards $1,080 levels, seen early this year.
The Fed is widely expected to hike interest rates for the first time in 2016 at a two-day meeting that begins on Tuesday. Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.
Markets were pricing in a nearly 100 percent chance for a quarter percentage point increase to the Fed’s target range.