Gold prices ease as U.S. dollar, yields gain

Gold prices slightly retreated on Monday from a three-month peak hit in the previous session, as the dollar and U.S. bond yields rose after a top U.S. central banker warned that the Federal Reserve is not ‘softening’ fight against inflation yet.

FUNDAMENTALS

* Spot gold was 0.5% down at $1,762.70 per ounce, as of 0054 GMT, after hitting its highest since Aug. 18 on Friday. U.S. gold futures eased 0.2% to $1,766.

* Gold prices posted their biggest weekly percentage gain since March 2020 last week after signs cooling U.S. inflation lifted hopes that the Fed could be less hawkish on rate hikes.

* However, Fed Governor Christopher Waller on Sunday said the Fed may consider slowing the pace of rate increases at its next meeting but that should not be seen as a “softening” of its battle against inflation.

* Waller said markets should now pay attention to the “endpoint” of rate increases, not the pace of each move, and the endpoint is likely “a ways off.”

* Fed fund futures are now pricing in a 90% chance of a 50-basis point rate hike at the Fed’s December meeting.

* Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

* The dollar index rose 0.4% against its rivals after falling to a near three-month low on Friday, making gold more expensive for other currency holders.

* Benchmark U.S. 10-year Treasury yields edged up from a one-month low, increasing the opportunity cost of holding non-interest bearing gold.

* Elsewhere, a spike in domestic prices put off gold consumers in India last week and prompted dealers to offer discounts, with higher rates playing spoilsport in China as well.

* Spot silver fell 0.5% at $21.57 per ounce. Platinum eased 0.2% to $1,026.20 and palladium was steady at $2,037.60.