Gold prices decline in early trade

20 Feb 2023 , 09:17 AM

A stronger dollar and recent U.S. economic statistics caused gold prices to decline on Monday, fuelling concerns that the Federal Reserve may increase interest rates further.

Spot gold was down 0.2% at $1,837.59 per ounce. To $1,847.60, U.S. gold futures declined by 0.1%.

When the dollar index increased, buyers holding foreign currencies found it less appealing to purchase gold priced in dollars.

Since recent statistics revealed a tight labour market, along with high inflation and consumer prices, the money markets now anticipate the Fed to raise benchmark rates above 5% by May, with rates peaking at 5.3% in July.

High interest rates raise the opportunity cost of owning non-yielding metal, despite the fact that gold is regarded as a hedge against skyrocketing inflation.

According to data released on Friday, U.S. import prices fell for a seventh consecutive month in January due to falling energy product prices, resulting in the least annual increase in imported inflation in the past two years.

Retail demand for physical gold in India increased last week as a result of a steep decline in domestic prices, causing dealers to start charging premiums for the first time in more than three months.

The largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, reported that its holdings decreased 0.13% to 919.92 tonnes on Friday from 921.08 tonnes on Thursday.

Silver spot prices dropped by 0.7% to $21.58 an ounce, platinum dropped by 0.3% to $914.17, and palladium dropped by 0.6% to $1,488.61.

Due to an American holiday on Monday, market activity may be somewhat muted.

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