Gold prices edged lower on Monday after solid U.S. jobs data last week boosted the prospect of aggressive interest rate hikes by the U.S. Federal Reserve, lifting the dollar and Treasury yields.
Spot gold was down 0.1% at $1,771.74 per ounce, as of 0454 GMT, after dropping 1% in the previous session. U.S. gold futures eased 0.2% to $1,788.20.
“Gold off to a tranquil start as the market is still digesting the implication of the bumper U.S. jobs report and to what extent it will influence the Fed,” said Stephen Innes, managing partner at SPI Asset Management.
“I think the July surge in non-farm payroll employment raises the odds of a third 75-basis-point rate hike in September, which should be negative for gold.”
Traders currently see a 73.5% probability the Fed continues the pace of 75-basis-point rate hikes for its next policy decision on Sept. 21 to tame soaring inflation after U.S. job growth unexpectedly accelerated in July.
The stunning U.S. payrolls report pushed back against recession talks and lifted the dollar index to its highest since July 28, making gold more expensive for other currency holders.
Benchmark U.S. 10-year Treasury yields hovered near their highest level in more than two weeks scaled on Friday.
The Fed should consider more 75-bp rate hikes at coming meetings in order to bring inflation back down to its goal, Fed Governor Michelle Bowman said on Saturday.
Although gold is seen as a hedge against inflation, rising U.S. interest rates dull bullion’s appeal.
Focus this week will be on U.S. inflation data due on Wednesday that could offer more clues on the Fed’s rate hike path.
On the technical front, spot gold may break a support at $1,767 per ounce, and fall into $1,748-$1,756 range, according to Reuters technical analyst Wang Tao.
Spot silver was flat at $19.87 per ounce, platinum fell 1.3% to $920.25, and palladium was steady at $2,125.68.