Gold prices edged higher on Monday amid investor buying “on the dip” following the precious metal’s biggest weekly decline in 15 months.
Spot gold climbed 1.0% to $1,783.44 an ounce by 11:40 a.m. ET, holding above the $1,780 level last seen in early May. US gold futures recovered 0.8% to trade at $1,784.10 an ounce in New York.
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Last week, bullion slumped to the lowest since April after policy makers at the US Federal Reserve brought forward their expectations for when monetary tightening would start. Gold declined 6.0% for its worst weekly performance since March 2020.
That prompted exchange-traded funds to add the most gold in three months on Friday, according to an initial tally by Bloomberg, a sign some investors saw bullion’s decline as a buying opportunity.
“Technically, gold was massively oversold, which would bring in the professionals, and retail interest in southeast Asia had been picking up on an underlying basis already,” Rhona O’Connell, an analyst at StoneX, told Bloomberg.
The focus will now turn to speeches by Fed officials for more clues on the direction of monetary policy. Chairman Jerome Powell is due to testify on Tuesday at a House Subcommittee hearing on the Fed’s pandemic emergency lending and its asset purchase programs.
St. Louis Fed President James Bullard said on Friday that inflation risks may warrant the US central bank beginning raising interest rates next year. That stands in contrast to Powell, who earlier cautioned that discussions about raising interest rates would be “highly premature.”
Gold market watchers were also monitoring the US bond market, where rates on 10-year treasuries have slumped in the wake of the Fed’s hawkish tilt. That makes non-interest bearing gold seem a more attractive haven.
Still, Macquarie Group Ltd.’s Marcus Garvey sees that move as temporary, leaving a bearish outlook for bullion.
“Because the 10-year rate will still rise with service sector recovering, and inflation expectations are probably capped by policy tilt, so real yields up and gold down is the next few months trend,” Garvey said.
“And with the Fed ahead of the ECB now, the US dollar should be pretty firm too.”
(With files from Bloomberg)