Gold prices increased on Monday as the dollar pulled back, despite concerns about further interest rate hikes from the U.S. Federal Reserve that kept bullion close to a two-month low. Spot gold rose 0.5% to $1,818.89 an ounce by 10:08 a.m. ET (1508 GMT), while U.S. gold futures also rose 0.5% to $1,825.70. The dollar index fell 0.4% after hitting a seven-week peak, making gold more affordable for overseas buyers. However, gold prices have been sliding due to higher-than-expected inflation, with economic data continuing to remain robust.
Bart Melek, Head of Commodity Markets Strategy at TD Securities, noted that gold has support around $1,806, and it has been sliding on higher-than-expected inflation and the strength of the economy. Although gold prices hit their highest since April 2022 this month, they have since fallen by more than 7% after a slew of U.S. data pointed to a resilient economy. On Friday, U.S. consumer spending increased by the most in almost two years in January, while inflation accelerated, raising concerns that the Fed could continue raising interest rates into summer.
Lukman Otunuga, Senior Research Analyst at FXTM, highlighted that gold's appeal could be dampened by rising interest rates, as they increase the opportunity cost of holding the non-yielding asset. He noted that gold would continue to be highly sensitive to chatter by Fed officials, key economic data, and inflation-related topics as we head into the new month. Meanwhile, spot silver remained flat at $20.77 per ounce, while platinum climbed 3.7% to $942.81, and palladium gained 3.7% to $1,455.76.
According to Melek, there is still the possibility of a recession. However, at this point, there is significant physical buying for platinum and palladium out of Asia, with supply issues from Russia and South Africa helping to boost the metals' rally.
