Gold reels to 4-month low on fears of early Fed tapering

Gold fell as much as 4.4% to a more than four-month low on Monday as robust US jobs data stoked concerns of a sooner-than-expected interest rate hike, which could increase the opportunity cost of holding non-interest bearing bullion.

Spot gold was down 1.4% at $1,738.53 per ounce by 0406 GMT, paring earlier losses. Prices touched $1,684.37, their lowest since March 31 earlier in the session, triggered by stop-loss selling.

US gold futures slipped 1.4% to $1,739.00.

Gold prices slightly changed

"Gold has failed to recapture the $1,750.00 level and the outlook remains bearish now," said Jeffrey Halley, senior market analyst for Asia Pacific at OANDA.

"Friday's non-farm payroll data and potentially the US infrastructure bill this week, have put Fed tapering before year-end firmly back on the table."

Data from the US Labor Department showed US employers hired the most workers in nearly a year in July and continued to raise wages.

That underscored remarks by Fed officials suggesting a sooner than anticipated roll-back of pandemic-era stimulus on the back of a solid labour market recovery.

The data helped lift the benchmark US 10-year Treasury yields, hurting gold's appeal as an inflation hedge.

Meanwhile, the dollar index hit a two-week high on Monday.

"Gold's metal will probably get tested into the CPI data this week," said Stephen Innes, a managing partner at SPI Asset Management, adding that a strong inflation number could increase the probability of an early interest rate hike.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell to 1,025.28 tonnes on Friday, from 1,027.61 tonnes on Thursday.

Silver slumped as much as 7.5% hitting a more than eight-month low of $22.50 per ounce earlier in the session. It was last down 1.9%.

Platinum fell 0.9% to $971.05, having earlier hit a low since November 2020 of $959.93. Palladium was flat at $2,626.56.