Gold prices dropped by 1% on Monday, pressured by rising global bond yields and a strengthening US dollar, as traders adjusted expectations for potential interest rate cuts by the Federal Reserve.
By 12:15 p.m. ET, spot gold was trading at $2,662.52 per ounce, still near its highest level in a month. Meanwhile, US gold futures fell 1.3%, settling at $2,680 an ounce in New York. This decline follows four consecutive days of gains leading up to last week’s robust US jobs report, which exceeded expectations and prompted major banks to revise their forecasts for future interest rate cuts.
The strong jobs data contributed to a rise in both bond yields and the dollar, diminishing gold’s appeal. On Monday, the yield on the benchmark 10-year Treasury note reached its highest level in 14 months, while the dollar index climbed to its highest point since November 2022.
Bob Haberkorn, senior market strategist at RJO Futures, noted, “We had a better-than-expected US jobs report, which strengthened the dollar and Treasury yields. Gold’s move lower is a continuation of that stronger-than-expected report.” He also mentioned that some profit-taking occurred after gold had a strong performance last week.
Investors are now awaiting key US economic data, including inflation figures, weekly jobless claims, and retail sales, for further clues on the economy and the Federal Reserve’s next steps.
Fawad Razaqzada, market analyst at City Index and FOREX.com, wrote in a note, “Should Wednesday’s CPI inflation data show signs of persistency, any calls for a rate cut in the first half of the year will be firmly dismissed.”
Markets are currently pricing in a 25 basis point rate cut this year, down from expectations of a 40 basis point cut just a week ago, according to Reuters.
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