Gold Extends Losses as Stronger Dollar and Uncertainty Over U.S. Rate Cuts Pressure Markets

Gold prices retreated for a third straight session on Monday, weighed down by a firmer U.S. dollar and renewed uncertainty over the Federal Reserve’s interest rate outlook. The metal slipped as the dollar hovered near a six-month high, increasing costs for holders of other currencies and limiting appetite for bullion.

Spot gold fell 0.3 per cent to $4,055.73 per ounce at 0636 GMT, while U.S. gold futures for December delivery declined 0.7 per cent to $4,052.40 per ounce. Analysts said the dollar’s strength remained the dominant factor shaping sentiment.

“The dollar index is up near six-month highs, it’s above 100 and if it continues to trade above 100, then there will be further pressure on gold prices,” said Jigar Trivedi, senior research analyst at Reliance Securities.

The dollar’s position near levels reached on Friday reinforced concerns about ongoing headwinds for commodities priced in the U.S. currency. The shift also reflected changing expectations around the timing of the Fed’s next move. According to the CME FedWatch Tool, the probability of a rate cut next month slipped to 69 per cent on Monday, down from 74 per cent in the previous session.

The likelihood of near-term easing had surged at the end of last week after New York Fed President John Williams delivered remarks interpreted as dovish. But other policymakers struck a different tone. Dallas Fed President Lorie Logan said interest rates should remain on hold “for a time,” while leaders of the Chicago and Cleveland Fed banks warned that cutting too soon could pose risks to the economy.

Gold typically benefits when borrowing costs fall, as lower rates reduce the opportunity cost of holding non-yielding assets. With mixed messages from policymakers and a dollar trending higher, analysts see little near-term support.

“Next three to five weeks will see a flattish to negative undertone in gold as there is no major significant support coming for the bulls in the absence of geopolitical tensions,” Trivedi said.

Markets are also monitoring geopolitical developments. The United States and Ukraine are expected to continue discussions on Monday over a revised plan aimed at ending the conflict with Russia, after both sides agreed to adjust an earlier proposal viewed as leaning too heavily in Moscow’s favour.

Among other precious metals, spot silver was steady at $49.99 per ounce. Platinum rose 1.6 per cent to $1,535.85, and palladium gained 1.1 per cent to $1,390.13.