Gold prices experienced a drop on Monday as the US Dollar (USD) soared to its highest level in over two years. This shift followed a strong U.S. jobs report last week, which reinforced expectations that the Federal Reserve will remain cautious about cutting interest rates this year.
Gold Prices Decline Amid Stronger USD
Spot gold fell by 0.7%, reaching $2,670.86 per ounce at 10:00 a.m. ET (1500 GMT), after hitting a 1% drop earlier in the session. U.S. gold futures also dropped 0.9% to $2,689.80. Bob Haberkorn, senior market strategist at RJO Futures, explained that the drop was a result of the stronger-than-expected jobs report, which boosted the U.S. dollar and Treasury yields. The report also led to some profit-taking after a strong week for gold.
Impact of Strong US Job Report and Dollar Surge
The U.S. jobs report indicated the strength of the economy, which helped push the dollar index to its highest point since November 2022. A stronger dollar makes gold more expensive for buyers in other countries, further driving the price decline. Meanwhile, the market now anticipates further economic data releases, including U.S. inflation data and retail sales, to gain more clarity on the Federal Reserve’s future policy decisions.
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Investor Sentiment and Expectations for the Fed’s Policy
Despite gold’s drop, analysts remain focused on U.S. inflation data and other key economic indicators. Fawad Razaqzada, market analyst at City Index and FOREX.com, noted that if Consumer Price Index (CPI) inflation data this week shows persistent inflation, any hope for a rate cut in the first half of the year will likely be dismissed. Currently, the market is expecting a 25-basis-point rate cut this year, a decrease from last week’s 40-basis-point expectation.
Other Precious Metals See Losses
Silver, platinum, and palladium also saw declines. Spot silver fell 2.1% to $29.76 per ounce, platinum dropped 0.7% to $958.40, and palladium shed 1% to $938.23. The weakening of gold prices and the stronger dollar dampened the appeal of these precious metals as well.
With the economic outlook uncertain and inflation data looming, investors will continue to monitor U.S. economic reports for signs that could influence the Fed’s actions and shape the future of precious metal prices.
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