Gold prices gave up early gains and moved lower on Monday as the U.S. dollar recovered part of last week’s sharp decline. Ongoing uncertainty over U.S. interest rates also kept pressure on the precious metal.
The pullback came after gold rebounded from eight-month lows last week. Meanwhile, the dollar moved higher after recently falling close to a two-week low.
Spot gold fell 0.6% to $4,151.66 an ounce by 01:16 ET, or 05:16 GMT. Gold futures declined 0.7% to $4,167.29 an ounce.
Gold Posts First Weekly Gain Since May
Gold prices rose more than 2% last week, marking their first weekly gain since mid-May.
The rally followed weaker U.S. nonfarm payrolls data on Thursday. The soft labor market report caused traders to reduce expectations that the Federal Reserve will have enough room to raise interest rates again this year.
Interest Rates Remain Key for Gold
Inflation and employment remain two of the Federal Reserve’s most important factors when setting interest rates.
Sticky inflation and a resilient labor market usually give the central bank more reason to raise rates. However, weaker jobs data can reduce pressure for further tightening.
Higher interest rates are generally negative for gold. They increase the opportunity cost of holding non-yielding assets like bullion compared with government bonds.
This pressure has weighed heavily on gold this year and pushed prices well below their January record highs.
Silver and Platinum Also Retreat
Other precious metals also moved lower on Monday after posting strong gains last week.
Spot silver fell 1.1% to $61.7430 an ounce. Spot platinum declined 0.4% to $1,635.31 an ounce.
Dollar Recovers as Fed Minutes Approach
The dollar index rose 0.1% on Monday, recovering from last week’s near two-week low.
Markets remain uncertain over whether the Federal Reserve will raise interest rates again this year. Despite last week’s weakness, the dollar stayed close to the 13-month highs reached in June.
The minutes from the Federal Reserve’s June meeting are due this week. Investors will study them closely for more clues about the future path of U.S. interest rates.
Inflation Concerns Still Support Rate Hike Risks
Lower oil prices helped ease some concerns about persistent inflation.
However, markets remain cautious about other inflation risks. These include price pressures linked to the artificial intelligence industry and the impact of rising global temperatures.
During the June meeting, Fed policymakers signaled that sticky inflation may still require at least one interest rate hike this year.
Gold Outlook
Gold remains sensitive to both the U.S. dollar and Federal Reserve policy expectations.
If the dollar continues to recover, gold prices could face more pressure. However, softer economic data and reduced rate hike expectations may help limit further losses.
For now, investors are focused on the Fed minutes and whether gold can regain momentum after last week’s rebound.
