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Gold fell 1% on Monday after the dollar strengthened and Treasury yields rose as data showing surging inflation in the U.S. fuelled bets for steeper rate hikes from the Federal Reserve.

Spot gold fell 0.9% to $1,853.99 per ounce by 1212 GMT, retreating from a more than one-month high of $1,877.05 touched earlier.

U.S. gold futures shed 1% to $1,856.80.

Data on Friday showed U.S. consumer prices accelerated in May, marking its largest annual increase in nearly 40-1/2 years, making the case for aggressive rate hikes.

While inflation worries normally support gold, expected rate hikes to combat the rising prices tend to boost the dollar and reduce the appeal of non-yielding bullion.

Bullion is suffering due to the strength to the dollar, said Carlo Alberto De Casa, external market analyst at Kinesis.

But the fact that gold continues to hold above the $1,850 technical support level following the rebound on Friday shows there’s still good interest from investors, De Casa added.

Gold slips as dollar firms ahead of U.S. inflation data

A volatile session on Friday led to gold falling to a near one-month trough before rebounding as economic concerns took centre stage.

U.S. 10-year Treasury yields and the dollar jumped, making gold more expensive for overseas buyers.

The Fed’s June meeting outcome could be key for gold. Markets have priced 80% odds of a half-point increase and 20% odds of a 75 basis points hike.

“It is a near-inevitability that there will be a knee-jerk reaction in gold and the money markets—there almost invariably is—and then the markets will take a longer-term view,” StoneX analyst Rhona O’Connell said in a note.

“On balance, the tailwinds for gold are stronger than the headwinds, but they are currently—potentially until mid-week—supportive rather than bullish.”

Silver slipped 1.3% to $21.59 an ounce, platinum fell 2.8% to $946.06, and palladium shed 3% to $1,876.26.

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