Gold inches up on softer dollar as hawkish rates moves limit gains

Bengaluru — Gold prices edged higher on Monday on a softer dollar, though prospects of central banks worldwide retaining their aggressive monetary policy stance limited the gains for safe-haven bullion.

Spot gold had risen 0.3% to $1,663.99 per ounce by 6.16am. US gold futures were flat at $1,671.50.

The dollar index slipped in early Asia trade against a basket of currencies, while benchmark US 10-year Treasury yields were slightly lower after rising for two days.

“Recovery [gold’s] seems to be more of a near-term moderation from oversold technical conditions, as no slack in Fed’s tightening policies may suggest that any upside could potentially be sold into,” said IG market strategist Yeap Jun Rong.

The Federal Reserve’s No 2 official on Friday added her full endorsement of the US central bank’s higher-for-longer game plan for interest rates to curb inflation.

Last month, the Fed raised its policy interest rate by 75 basis points, its third consecutive increase of that size, and signalled more large increases to come this year.

Gold posted its sixth consecutive monthly decline in September, marking its longest streak of monthly declines in four years.

Though gold is often seen as a hedge against inflation, rising US interest rates increase the opportunity cost of holding the non-yielding asset and boost the dollar.

Meanwhile, eurozone inflation hit a record high last month, reinforcing expectations for another jumbo rate hike this month from the European Central Bank.

On investors’ radar are the US non-farm payrolls data due on Friday and a host of manufacturing PMI data for insight into the health of the global economy.

“A more lukewarm [payrolls] reading may be preferred by gold bulls for a relief rally, but the absence of any pause in the Fed’s policies could still suggest that the overall downward trend may remain intact,” Rong said.

Spot silver rose 1.2% to $19.23 per ounce, platinum edged 0.2% higher to $860.61 and palladium was up 0.3% to $2,164.89.

Reuters