Gold prices declined in thin trading on Monday as the U.S. dollar strengthened, while market participants looked forward to U.S. Federal Reserve Chair Jerome Powell’s upcoming testimony on Capitol Hill later in the week.
By 10 a.m. EDT (1400 GMT), spot gold was down 0.3% at $1,952.00 per ounce. U.S. gold futures also fell by 0.4% to $1,964.00. With the U.S. markets closed for the Juneteenth holiday, trading activity was expected to be slow.
The rebound in the dollar index from a one-month low reached on Friday contributed to the decline in gold prices. A stronger dollar makes gold less appealing for buyers holding other currencies.
There is uncertainty regarding what it would take for gold to break out of its trading range between $1,940 and $1,980, according to Craig Erlam, senior markets analyst at OANDA. Despite recent events, the price of gold has not been able to move significantly beyond this range.
Gold experienced a 0.2% weekly decline last week as traders increased their expectations for a rate hike in July following the hawkish comments from Fed officials. The central bank had previously decided to maintain interest rates after a series of 10 consecutive hikes.
Market participants are now eagerly awaiting Powell’s congressional testimonies on Wednesday and Thursday, hoping for insights into the future direction of interest rates.
Heraeus analysts noted that as inflation falls later in the year, real interest rates will continue to rise, reducing the appeal of gold as a non-yielding asset and potentially strengthening the dollar.
In addition to Powell’s testimony, the European Union’s inflation data scheduled for Wednesday and the anticipated 25 basis point rate hike by the Bank of England on Thursday are events that investors are watching closely.
Interest rate hikes raise the opportunity cost of holding non-yielding assets like gold.
Other precious metals also experienced declines. Spot silver fell 0.7% to $23.98 per ounce, platinum was down 0.5% at $977.25, and palladium dropped 0.7% to $1,400.65.
