Gold prices experienced a decline on Monday as the anticipation of a delayed U.S. rate cut supported the dollar and bond yields, setting the stage for a critical inflation release later this week.
As of 0342 GMT, spot gold (XAU=) was down 0.4%, reaching $2,037.39 per ounce, while U.S. gold futures (GCcv1) fell 0.3% to $2,043.60 per ounce. Trading remained thin in Asia, with the Japanese market closed for a holiday.
Analysts attribute the decline to the aftermath of robust jobs data, as Kyle Rodda, a financial market analyst at Capital.com, noted, “It’s all tied back to cooling off of expectations for rate cuts this year.”
The dollar index (DXY) rose by 0.1%, following its best week since July 2023, making gold more expensive for holders of other currencies. Meanwhile, benchmark U.S. 10-year Treasury yields remained above 4%.
Official data revealed that U.S. employers hired more workers than anticipated in December. However, data from the Institute for Supply Management (ISM) suggested a significant slowdown in the services sector last month.
Market sentiment has shifted, with participants now pricing in a 64% chance of a rate cut by the U.S. central bank in March, down from the nearly 90% probability seen before the New Year, according to the CME FedWatch tool.
Kyle Rodda remains cautiously optimistic about the near term but suggests that the retracement in gold prices might have a bit more to go. On the technical front, Reuters analyst Wang Tao suggests that spot gold may fall into a range of $2,028-$2,035 per ounce.
Investors are now eagerly awaiting Thursday’s U.S. consumer price inflation report, anticipating it will provide further insights into the Federal Reserve’s pace and scale of rate cuts.
