Gold edges down on firmer dollar, US rate-hike worries

GOLD prices fell on Monday (Feb 20), weighed down by a stronger dollar and after recent US economic data raised worries that the Federal Reserve could hike interest rates further.

Spot gold was down 0.2 per cent at US$1,837.59 per ounce, as of 0048 GMT. US gold futures eased 0.1 per cent to US$1,847.60.

The dollar index was up 0.2 per cent, making greenback-priced bullion less attractive for buyers holding other currencies.

Money markets are now expecting the Fed to raise benchmark rates above 5 per cent by May, with rates to peak at 5.3 per cent in July, after recent data showed a tight job market, along with high inflation and consumer prices.

Gold is considered a hedge against soaring inflation, but high interest rates increase the opportunity cost of holding non-yielding bullion.

Data on Friday showed US import prices dropped for a seventh straight month in January amid declining costs for energy products, leading to the smallest annual increase in imported inflation in two years.

A sharp retreat in domestic prices boosted retail demand for physical gold in India last week, prompting dealers to charge premiums for the first time in more than three months.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.13 per cent to 919.92 tonnes on Friday from 921.08 tonnes on Thursday.

Spot silver lost 0.7 per cent to US$21.58 per ounce, platinum fell 0.3 per cent to US$914.17 and palladium shed 0.6 per cent to US$1,488.61.

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Gold dips on dollar advance, Fed’s rate-hike prospects

Market activity could be relatively low on Monday due to a holiday in the United States. REUTERS