Gold prices were flat on Monday as investors traded cautiously ahead of U.S. inflation data expected later this week to gauge the impact of interest rate hikes and if more policy tightening was on the cards.
Spot gold was little changed at $1,922.99 per ounce by 0837 GMT. U.S. gold futures were down 0.2% to $1,928.10.
“Bullion’s knee-jerk spike on Friday has been swiftly tapered by the notion that this latest U.S. jobs report won’t yet allow the Fed to halt its rate hikes,” Exinity Chief Market Analyst Han Tan said.
Last week’s employment report showed the U.S. economy added the fewest jobs in 2-1/2 years in June, but persistently strong wage growth pointed to still-tight labour market conditions.
“If the incoming core U.S. CPI print (on Wednesday) lays bare still-stubborn inflationary pressure, that may prompt bullion bears to push the precious metal into sub-$1,900 waters, provided markets ramp up bets for yet another Fed rate hike after July,” Tan added.
Bullion prices have dropped over 7% since reaching near-record levels in early May as investors scaled back expectations of an end to the Fed’s rate-hiking cycle.
Gold prices are highly sensitive to higher interest rates as they dampen the appeal of bullion, which pays no interest, while a stronger dollar also makes it less attractive for overseas investors.
“While a July rate hike is all but baked into the cake, what happens to U.S. interest rates between August and the end of the year is still an open question. As such, inflation gauges are the fulcrum around which market sentiment swings,” said Tim Waterer, chief market analyst at KCM Trade.
In other precious metals, spot silver was flat at $23.0453 per ounce, platinum rose 0.1% to $907.26, while palladium fell 0.5% to $1,238.27.
