Gold prices fell to a two-month low on Tuesday and were on course for their largest monthly drop since June 2021, weighed down by a higher dollar and the likelihood of further Fed rate rises.
Spot gold was down 0.17% at $1,814.30 after hitting a low of $1,804.20 in late December. Gold futures in the United States just fell to $1,814.90.
Prices reached their highest level since April 2022 in early February but quickly fell. Bullion has dropped more than 6% this month as solid economic data has raised anticipation of future rate rises by the US Federal Reserve.
According to Carlo Alberto De Casa, an external analyst at Kinesis-Money, gold has had a bad month since the market expects interest rates to remain higher for a longer period of time.
“If inflation continues to rise, then gold might fall to the $1,730-$1,740 range.”
Fed Governor Philip Jefferson stated on Monday that he had “no illusions” that inflation will return to the US central bank’s target rate soon.
While gold is seen as an inflation hedge, increasing interest rates raise the opportunity cost of owning the non-yielding asset.
Gold is approaching a very intriguing level of support between $1,780 and $1,800, but economic data may determine how solid a support zone it will be, according to Craig Erlam, senior market analyst at OANDA.
“How it reacts at this level could give a strong indication of sentiment in the markets at this time.”
The dollar index was on track for a monthly gain, making gold priced in greenbacks less appealing to holders of foreign currencies.
Spot silver rose 0.02% on the day to $20.52 per ounce, heading for its second consecutive monthly decline. Platinum rose 0.52% to $943.80, while palladium fell 1.42% to $1,410.26. Prices for both metals were expected to fall for the month.