Gold edged lower, as traders weighed the impact of a stronger dollar and higher Treasury yields on the Federal Reserve’s path for interest rates.
Spot bullion fell as much as 0.8% to near $4,100 an ounce before paring losses. The dollar neared its highest level this year on Monday as the euro weakened after a bond selloff in France that had traders on alert for signs of regional contagion . A stronger greenback is typically a headwind for commodities priced in the currency.
Treasuries came under renewed pressure , pushing longer-dated yields to multi-decade peaks as bonds extended their slide. Further inflationary signals were seen in an Institute for Supply Management report that showed cost pressures in US services last month grew the most in more than four years.
Despite the inflationary indicators, Fed officials have been talking down the chance of an imminent rate hike, and traders are pricing in a roughly one-in-five chance the central bank will raise borrowing costs at its meeting this month.
Minutes of the Fed’s September meeting, where rates were raised for the first time in three years, are due Wednesday. Higher rates are typically negative for bullion, relative to yield-bearing assets like Treasuries.
“Gold and silver remain under pressure as a firmer US dollar and climbing Treasury yields weigh on the metals,” said Renisha Chainani, chief research officer at gold trading platform Augmont Enterprises Ltd. “Losses have stayed limited, though, because markets have scaled back expectations of a Federal Reserve rate hike this month.”
Gold fell more than 6% last month on concerns over energy-driven inflation as well as the prospect for higher US rates and the strengthening dollar. It’s down more than a fifth since the US-Iran conflict began in late February.
Spot gold fell 0.2% to $4,132.15 an ounce at 8:00 a.m. in London. Silver fell 0.7% to $60.67 an ounce. Platinum and palladium both declined. The Bloomberg Dollar Spot Index, a gauge of the US currency, gained 0.1%.