Gold prices drifted lower on Monday as the dollar climbed up ahead of some crucial economic data, including inflation reports from the U.S., Europe and China, among others.
The dollar hit a multi-month high against major counterparts following hawkish comments on interest rates from the Federal Reserve and other central banks.
The dollar index surged to 106.10 and despite paring some gains subsequently, remains well up at 105.95.
Gold futures for December ended down $9.00 at $1,936.60 an ounce.
Silver futures for December ended lower by $0.459 at $23.385 an ounce, while Copper futures for December settled at $3.6700 per pound, down $0.0260 from the previous close.
With oil prices surging towards $100 a barrel mark, there are concerns the Fed will have to keep interest rates higher for longer than previous anticipated to fight inflation.
Markets await the Fed’s preferred inflation readings, a speech from Fed Chair Jerome Powell, Q2 GDP final estimate and other reports on new home sales, durable goods orders and consumer confidence this week for direction.
Markets also brace for a U.S. government shutdown, with the White House warning of severe economic consequences if Congress fails to pass a funding bill by an October 1 deadline.
Meanwhile, concerns about China’s property market have resurfaced after China Evergrande Group, the world’s most indebted property developer, said it was unable to issue new debt due to an ongoing investigation into its main domestic subsidiary, Hengda Real Estate Group Co.
Edward Moya, Senior Market Analyst at OANDA says gold has formed a bottom. “The end of tightening is very close for the Fed and higher-for-longer has been priced in by most gold traders. Gold appears to have a major floor at $1900, the $1920 is short-term support. Once the US outlook deteriorates, safe-haven flows appear poised to head gold’s way,” he adds.
Moya adds further: “A peak in the dollar is not here yet, but gold’s downside should be limited given Europe’s outlook should either stabilize which will help end the dollar’s reign or surging oil will kill the outlook and trigger a wave of safe-haven flows.”
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