Gold prices tumbled to their lowest level in 3 weeks on Monday, weighed down by a sturdy dollar and elevated Treasury yields that dampened hopes for an early Fed rate cut.
Spot gold plunged 1.2% to $2,020.69 per ounce, nearing a December 18th low. U.S. gold futures also dropped 1.1% to $2,026.80 as markets eyed upcoming inflation statistics.
“I’m expecting inflation data to be a central catalyst, and higher-than-expected figures could further pressure gold by reducing chances of a rate cut,” said analyst Carlo Alberto De Casa.
“In the first quarter, unless inflation significantly declines, it would be very difficult for central banks to cut rates in 2024,” he added.
The dollar’s persistent strength along with rising yields on concerns over still-high inflation has weakened bets on an imminent policy easing. This has tarnished gold’s allure as an inflation hedge and alternative currency.
Prices now hinge on U.S. CPI figures this week to determine if the Fed could be forced to maintain aggressive rate hikes for longer.