Gold prices edged lower on Monday for a second consecutive session, as investor focus shifted to central bank meetings for clarity on their rate-hike strategies that may shed light on whether progress has been made in taming inflation.
Spot gold was down 0.1% at $1,980.59 per ounce, as of 0405 GMT.
US gold futures were flat at $1,991.10. Gold is highly sensitive to rising interest rates, which raise the opportunity cost of holding non-interest bearing bullion.
“Some firming in US Treasury yields following last Friday’s flash PMI data are keeping the downward pressure on gold prices,” said Yeap Jun Rong, a market analyst at IG.
Gold prices dropped by more than 1% on Friday after the release of surveys that showed the US and euro zone business activity gathered pace in April.
The CME FedWatch tool shows that markets are pricing in an 86.3% chance of a 25-basis-point hike by the US Federal Reserve at its May 2-3 meeting.
“While the Fed’s rate expectations have remained well-anchored thus far, further resilience in economic conditions over the coming weeks could brew speculations for another rate hike in June or push back against the timeline of rate cuts, which will be headwinds for the non-yielding yellow metal,” IG’s Yeap said.
Fed Governor Lisa Cook said on Friday the outlook for the next stage of central bank monetary policy has grown less clear after the institution has taken appropriately aggressive steps over the last year to lower price pressures.
Moreover, the European Central Bank is expected to hike rates by a quarter percentage point on May 4, with some likelihood for a half-point hike.
The Bank of England is seen raising rates to 4.5% on May 11.
In other precious metals, spot silver slipped 0.5% to $24.90 per ounce, platinum shed 2.3% to $1,098.01 and palladium dropped 1.2% to $1,583.53.
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