NEW YORK: Gold prices extended their retreat to fall more than 1% on Monday as the dollar hovered near two-decade highs and benchmark US Treasury yields were at their highest in nearly four years.

Spot gold was down 1.1% at $1,863.23 per ounce by 12:46 p.m. EDT (1645 GMT). US gold futures fell 0.9% to $1,865.40.

“The dollar has exploded higher given expectations of a more aggressive US Federal Reserve, in turn weighing on gold, which bears no interest,” said David Meger, director of metals trading at High Ridge Futures.

Making bullion more expensive for overseas buyers, the dollar, also considered a rival safe-haven, edged slightly lower but hovered near a two-decade high as benchmark 10-year US Treasury yields hit fresh 3-1/2 year highs, amid expectations of higher interest rates.

Two of the Fed’s policy hawks on Friday pushed back on the view the US central bank missed the boat on the fight against stubborn inflation, citing tightening financial conditions that began well before it began raising interest rates in March.

The rising yields also weighed on Wall Street, with sentiment taking a hit from fears of an economic slowdown in China.

While gold is considered a hedge against inflation and economic uncertainties, rapid US interest rate hikes increase the opportunity cost of holding the non-yielding bullion.

Spot palladium rose 2.6% to $2,099.23 per ounce, after shedding as much as 8% on Friday amid concerns over automobile demand due to COVID curbs in China.

Investors also took stock of Britain’s plan to increase tariffs on platinum and palladium imports from Russia and Belarus in new sanctions.

But prices of palladium, used in vehicle exhausts to reduce emissions, could come under pressure due to a likely market surplus with global light vehicle production forecasts for 2022 being downgraded amid the chip shortage and China’s curbs, Heraeus Precious Metals said in a note.

Platinum shed 0.5% to $957.99 and silver fell 1.9% to $21.92.