With fears that the U.S. Federal Reserve would continue to raise interest rates and a stronger dollar weighing on its appeal, gold prices on Tuesday were poised for their largest monthly decline since June 2021. Although gold prices reached their highest point since April 2022 in early February, they soon changed direction, with strong economic data boosting expectations of more rate hikes, causing bullion to fall over 5% this month.
Fed Governor Philip Jefferson stated that he had "no illusion" that the U.S. central bank's efforts to control inflation would end soon. By 10:36 a.m. ET (1536 GMT), spot gold had risen 0.4% to $1,824.49 per ounce, with U.S. gold futures also rising 0.4% to $1,831.50. While the greenback retreated on the day, the U.S. currency remained on course for its first monthly gain in five, rendering gold more expensive for overseas buyers.
According to Daniel Pavilonis, a senior market strategist at RJO Futures, the dollar and U.S. yields may decrease in the coming weeks, buoying gold prices, but they are likely to fall again soon (as the Fed continues to raise rates), dropping to $1,700 per ounce. Pavilonis said that recent lows may present an opportunity for people to purchase gold and become long. Bullion prices are on track for their first monthly decrease in four, as Carlo Alberto De Casa, an external analyst at Kinesis Money, explains that gold is having a negative month due to the market's anticipation of higher interest rates for a longer period.