Gold prices experienced a rise in Asian trading on Monday, extending a recovery from one-month lows observed after breaking below a critical support level. Despite this rebound, concerns about prolonged higher U.S. interest rates have kept gold prices within a relatively narrow trading range.
Earlier in February, the yellow metal briefly slipped below the $2,000 per ounce mark, driven by stronger-than-expected U.S. inflation data. The market largely discounted the possibility of early interest rate cuts by the Federal Reserve in response to these inflation readings.
Although gold managed to climb back above the support level in the past two sessions, it has struggled to break free from the $2,000 to $2,050 per ounce trading range established since mid-January. The metal faces challenges amid persistent U.S. inflation and a hawkish interest rate outlook.
Spot gold witnessed a 0.3% increase, reaching $2,019.95 per ounce, while April gold futures rose 0.4% to $2,031.15 per ounce as of 00:37 ET (05:37 GMT).
The strength of the U.S. dollar exerted pressure on gold, with the greenback remaining close to a three-month high following Friday’s stronger-than-expected producer price index inflation data. The recent inflation figures, combined with a robust consumer price index reading for January, have diminished expectations for an immediate shift towards looser monetary policy by the Federal Reserve.
Investor attention now turns to the minutes of the Fed’s late-January meeting, seeking additional insights into the central bank’s stance on interest rates. During the meeting, the Fed downplayed any expectations of early rate cuts, as highlighted by various Fed officials in recent weeks.
The prospect of higher-for-longer interest rates poses a challenge for gold, as it increases the opportunity cost of investing in the precious metal. This sentiment also weighed on other precious metals, with platinum futures declining by 0.3% and silver futures falling by 1.3%.