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Gold prices edged lower on Monday, extending the previous session's losses, as the dollar strengthened after data showing another advance in inflation fuelled bets over the Federal Reserve tightening its policy sooner.

Fundamentals

  • Spot gold fell 0.1% to $1,781.78 per ounce by 0044 GMT, after slipping to an over one-week trough on Friday. US gold futures dropped 0.1% to $1,782.80.

  • The US dollar steadied close to its highest level since Oct. 13 hit on Friday, making gold less appealing to buyers holding other currencies.

Gold hits over one-week low

  • Data released on Friday showed the jury was still out on the Fed's claim that current price spikes are transitory and should moderate with time, with the personal consumption expenditures price index advancing last month to continue a run of inflation at levels not seen in 30 years.

    • The Federal Reserve's two-day policy meeting concludes on Wednesday.
  • Gold is traditionally seen as an inflation hedge. However, reduced stimulus and interest rate hikes to combat such inflationary pressure tend to push government bond yields up, raising non-interest bearing gold's opportunity cost.

  • US Treasury Secretary Janet Yellen said on Friday she still sees inflation as a temporary result of severe supply chain bottlenecks, and expects inflation to normalize in 2022.

    • The euro zone economy has boomed over the summer with a European Central Bank (ECB) survey on Friday showing expected growth of 4.5% in 2022, but inflation is also blowing past expectations, leaving the ECB with a growing policy headache.

    • Physical gold was sold at a premium in India last week as consumers flocked to retailers ahead of big festivals, while premiums in top consumer China dropped.

    • Spot silver fell 0.2% to $23.81 per ounce. Platinum rose 0.5% to $1,023.03, while palladium eased 0.3%to $1,996.90.

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