Gold edges lower as stronger dollar and rising US Treasury yields weigh

Gold prices edged lower on Monday, pressured by a stronger US dollar and rising Treasury yields, as investors awaited the Federal Reserve’s monetary policy decision next week, with officials widely expected to leave interest rates unchanged.

 

In trading, spot gold fell 0.5% to $4,143.91 an ounce, while US gold futures for December delivery settled 0.5% lower at $4,160.10 an ounce.

 

The US dollar strengthened slightly, making dollar-denominated gold more expensive for holders of other currencies, while the yield on the benchmark 10-year US Treasury note rose 0.6%.

 

The Federal Reserve raised interest rates by a quarter of a percentage point in September, marking its first increase of the year.

 

However, analysts believe the key question is not simply whether the Fed will raise interest rates next week or wait until December, but also the tone of its forward guidance. A more hawkish message could put additional short-term pressure on gold prices.

 

According to the CME Group’s FedWatch Tool, traders currently price in an 82.8% probability that the Federal Reserve will leave interest rates unchanged this month, while expectations of a December rate hike remain at 90%.

 

Although gold is traditionally considered a hedge against inflation, higher interest rates reduce the appeal of the non-yielding precious metal.

 

Investors are also awaiting next week’s release of US personal consumption expenditures (PCE) data, the Federal Reserve’s preferred measure of inflation.

 

Lower oil prices ease inflation concerns

 

Meanwhile, oil prices retreated from five-month highs after US President Donald Trump exempted Russia from certain sanctions and tariffs, a move that could allow Russian fuel exports to increase.

 

The decline in oil prices helped ease some inflation concerns following stronger-than-expected US consumer and producer price readings last week.