Gold prices started the week on a downbeat note on Monday, as the dollar and Treasury yields continued higher amid optimism over the health of the U.S. economy and growing expectations of a Federal Reserve rate hike in December.
Comex gold futures fell to their lowest level since Aug. 16 at $1,275.55 a troy ounce before bouncing back to $1,277.30 by 3:00AM ET (0700GMT), down $7.70, or around 0.6%, from Friday’s closing price.
The yellow metal lost around 1% last week to cap a 2.7% decline in September, its largest monthly fall so far in 2017.
The dollar index, which measures the greenback against a basket of six major currencies, was up 0.4% at 93.30 in early trade.
Meanwhile, U.S. bond yields jumped, with the yield on two-year notes reaching a nine-year high of 1.50%, while the 10-year yield rose to 2.36%, its highest in more than two months.
About a dozen Fed speeches will get market attention in the week ahead, including fresh comments from Chair Janet Yellen, as traders watch for clues on interest rates.
Investors will also keep an eye out on a few U.S. economic reports, with Friday’s monthly employment data in the spotlight, to gauge how it will impact the Fed’s view on monetary policy in the coming months.
Interest rate futures are now pricing in about an 80% chance of a December Fed rate hike according to Investing.com’s Fed Rate Monitor Tool.
Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the greenback.
A stronger dollar can weigh on commodities priced in the currency as it makes them more expensive in other currencies.
Meanwhile, traders are likely to watch developments in Spain, where regional officials in Catalonia said a majority of the residents there voted in favor of breaking away in a banned referendum.
Elsewhere on the Comex, silver futures inched down 4.6 cents, or about 0.3%, to $16.63 a troy ounce, their worst level since Aug. 9.
Palladium traded at a premium to platinum for a fourth-straight day after prices for the two metals hit parity for the first time since 2001 last Wednesday, as demand expectations for the two assets diverge, amid waning demand for diesel cars.
Source: UK Investing.com