Gold nears 9-month low as looming rate hikes lift dollar

Gold prices fell on Monday, lingering near a recent nine-month low, after strong US job market data last week boosted the dollar and the likelihood of another big rate hike by the Federal Reserve.

Spot gold fell 0.3% to $1 736.11/oz by 12:17 GMT. US gold futures dipped 0.6% to $1 732.40.

The dollar rose about 0.8% dimming greenback-priced gold’s appeal among overseas buyers.

The jobs report published on Friday tempered some of the recessionary fears that were starting to cast doubts over how far the Fed could go in terms of tightening, said Ricardo Evangelista, senior analyst at ActivTrades. 

Rate hikes increase the opportunity cost of holding non-yielding bullion. A strong labour market is often considered a healthy economic indicator and gives the central bank more ammunition for another big hike, in turn pushing gold lower, analysts said.

Atlanta Fed President Raphael Bostic said on Friday he “fully” supports another three quarters of a percentage point rate hike at the Fed’s next policy meeting later this month. 

However, growing pessimism over the state of some economies in Asia, and geopolitical instability to some extent, mitigate gold’s losses, as bullion remains the go-to safe haven during times of trouble, Evangelista added.

Central banks in Canada and New Zealand are expected to tighten further this week.

“Gold has stumbled into the new week struggling to nurse deep wounds inflicted by an appreciating dollar and rising Treasury yields,” said Lukman Otunuga, senior market analyst at FXTM.

Looking at the technical picture, the next key levels can be found at $1 721.50 and $1 700, respectively.

Spot silver fell 0.5% to $19.20/oz, platinum dropped 2.3% to $876.53, palladium was down 2.5% to $2 127.31.