Investing.com-- Gold futures fell Monday, edging away from mid-$1,900 levels, as the dollar hit 10-month highs in response to the Federal Reserve’s warning last week that U.S. interest rates will remain higher for longer.
Gold’s most-active futures contract on New York’s Comex, December, settled down $9, or 0.5%, at $1,936.60 an ounce.
The spot price of gold was at $1,916.02 by 15:25 ET (19:25 GMT). Spot gold, determined by real-time trades in physical bullion and more closely followed than futures by some traders, was down $9.44, or 0.5%, on the day.
The Dollar Index on Monday extended its run up since last week, hitting its highest since November. A stronger dollar discourages buying of dollar-denominated commodities, including gold, by holders of other currencies.
The dollar has seen a resurgence since the Fed last week projected another quarter-percentage point rate increase by the year-end, despite leaving rates unchanged for September at a policy meeting on Wednesday.
Dollar spikes on Fed, global growth concerns
The prospect of higher interest rates bodes poorly for gold, given that it pushes up the opportunity cost of investing in the non-yielding asset. This trade battered gold over the past year, and has limited any major recovery in the yellow metal.
Fed Chair Powell told a news conference last week that the central was unwavering in its bid to bring inflation back to its long-term target of 2% from the current level of 3.7%
“We are prepared to raise rates further, if appropriate," Powell said. "The fact that we decided to maintain the policy rate at this meeting doesn't mean we have decided that we have or have not at this time reached that stance of monetary policy that we are seeking."
The Fed had raised interest rates 11 times between February 2022 and July 2023, adding a total of 5.25 percentage points to a prior base rate of just 0.25%.
Economists fear that the Fed’s renewed hawkish stance will dampen global growth though many also agree that a lid has to be put on oil prices if the Fed is to achieve its annual inflation target of 2%.
(Ambar Warrick contrbuted to this item)