Gold prices rose less on Monday due to a rise in the dollar and bond yields, after the precious metal rose to a new record high on growing expectations that the Federal Reserve could cut interest rates for the first time in June.
Spot gold was 0.2% higher at $2,236.55 an ounce as of 10:15 a.m. EDT (1415 GMT), after hitting a record high of $2,265.49 earlier in the session. U.S. gold futures climbed 0.8% to $2,256.90.
“The view is that the Fed will likely start cutting rates before we reach the 2% (inflation) target, based on what we’ve seen in the PCE data,” said Bart Melek, head of commodity strategies at TD Securities .
Friday’s data showed U.S. prices subdued in February, leaving a Fed rate cut in June on the table. Fed Chairman Jerome Powell said February’s inflation data was “more in line with what we want to see.”
Gold tends to rise when interest rates are low, which lowers the opportunity cost of holding non-yielding bullion.
Traders currently expect about a 63% chance that the US central bank will cut interest rates in June, according to the CME FedWatch tool.
However, the dollar rose 0.4% to a more than six-week high against rivals, making gold more expensive for holders of other currencies, while 10-year Treasury yields also rose. “(Fed officials) will probably warn the market that they don’t necessarily have to get aggressive with cuts. There’s no guarantee that the U.S. central bank will start cutting rates, and I think they will very clearly and that could cause some reversals here,” Melek added.
Bullion prices have also reached record highs in other currencies, including the euro, the yuan, the Japanese yen, the Indian rupee and the British pound sterling.
Spot silver fell 0.5% to $24.84 an ounce, platinum lost 1.3% to $896.55 and palladium slid 1.9% to $995.37.
