Gold prices edge lower as dollar rides prospects of more Fed rate hikes

BENGALURU — Gold prices edged lower on Monday as the dollar firmed after last week’s US inflation data supported the Federal Reserve’s outlook for future interest rate increases.

Spot gold was 0.10% lower at $1,251.17 an ounce (/oz) as of 0352 GMT. US gold futures for August delivery were down 0.20% at $1,252.50/oz.

The dollar strengthened against a basket of currencies and hit a fresh six-week high of 111.06 yen, supported by the relative strength of the US economy and on prospects of further rate hikes from the Federal Reserve.

“Monetary policy re-normalization induces the strength in the dollar and with that weakening gold prices,” said Mark To, head of research at Hong Kong’s Wing Fung Financial Group, adding that risk-aversion demand is not as significant as the impact of expected interest rate increases.

US consumer prices accelerated in the year to May, with a measure of underlying inflation hitting the Federal Reserve’s 2% target for the first time in six years, data showed on Friday.

The rise in price pressures will probably not shift the Fed from its stated path of gradual interest rate increases as policy makers have indicated they would not be too concerned with inflation overshooting its target.

Gold is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non- yielding bullion, while boosting the greenback.

Meanwhile, the US Mint sold 19,500 ounces of American Eagle gold coins in June, down 18.8% from the previous month, according to the latest data. Speculators cut their net long positions in COMEX gold and silver contracts in the week to June 26, US Commodity Futures Trading Commission data showed on Friday. Holdings of SPDR Gold Trust, the world’s largest gold- backed exchange-traded fund, fell 0.18% to 819.04 tons on Friday from 820.51 tons on Thursday.

Among other precious metals, silver fell 0.30% at $16.04/oz, palladium was 0.10% higher at $953.50/ oz, while platinum was down 0.30% at $845.25/oz. —