Gold Prices Drop as Dollar Gains Strength: Focus on Crucial US Economic Data This Week

Gold prices fell as the dollar strengthened against other currencies, while investors anticipated crucial US data set to be disclosed on Friday, which could offer insights into the Federal Reserve’s upcoming interest rate decision later this month.

During early Asian trading on Monday, bullion was valued at approximately $2,630 per ounce after a nearly 3% drop last week. The dollar appreciated against the euro amid rising political tensions in France, while the yen weakened as US Treasury yields increased. A stronger dollar renders gold more costly for those using other currencies, and higher yields typically put pressure on gold due to its lack of interest returns.

The decline in gold prices last week was attributed to a decreased demand for safe havens following a US-mediated cease-fire agreement between Israel and Hezbollah that came into effect mid-week. However, concerns over the intensification of Russia’s ongoing conflict in Ukraine continue to drive demand for safe-haven assets like gold.

Markets are preparing for the release of US nonfarm payroll figures later this week, which could influence the Fed’s interest-rate decision on December 18. Current market predictions suggest about a 70% chance that the US central bank will reduce benchmark borrowing rates by a quarter percentage point. Generally, lower borrowing costs are favorable for gold, as it does not provide any interest income.

The precious metal has risen approximately 30% this year, with gains driven by the easing of the US Fed’s monetary policy, central bank purchases, and increasing geopolitical and economic uncertainties. Some analysts foresee new record highs in 2025, with both Goldman Sachs Group and UBS Group AG issuing optimistic forecasts last month.

As of 10:36 a.m. in Singapore, spot gold had decreased 0.4% to $2,632.22 per ounce. The Bloomberg Dollar Spot Index increased by 0.4%. Prices for silver, platinum, and palladium also experienced declines.

© 2024 Bloomberg

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