By Sherin Elizabeth Varghese
(Reuters) – Gold prices eased on Monday, hovering below the over two-week peak hit in the previous session, as fading odds of an early U.S. interest rate cut weighed on the non-yielding metal, although growing tensions in the Middle East capped further losses.
Spot gold was down 0.1% at $2,034.6 per ounce, as of 0812 GMT, after climbing to its highest level since Feb. 7 on Friday. U.S. gold futures edged 0.2% lower to $2,044.5 per ounce.
“Geopolitical concerns have not dissipated and this is keeping the yellow metal very much on the radar of investors from a safe-haven standpoint,” Tim Waterer, chief market analyst at KCM Trade, said.
Tensions mounted in the Middle East over the weekend as Israeli troops and Palestinian gunmen clashed throughout the Gaza Strip, while mediators picked up the pace of talks on a possible ceasefire to free hostages held by Hamas.
Meanwhile, markets are focused on the Federal Reserve’s preferred inflation indicator – personal consumption expenditure (PCE) data – due on Thursday.
“If solid U.S. macro data continues to create hesitation from the Fed regarding when to cut rates, this could create further headwinds for gold as investors may chase yield elsewhere,” Waterer said.
Markets are currently pricing in a 71% chance of a Fed rate cut in June, according to the CME Fed Watch Tool.
A hawkish Fed tone, rebounding U.S. dollar, and resilient economic data are pushing out FOMC (Federal Open Market Committee) policy rate cuts to mid-2024, Citi Research, which lowered its 0-3 month gold price target to $1,950 per ounce, said in a note.
Lower interest rates boost the appeal of holding non-yielding bullion and weigh on dollar. The dollar index was on the backfoot after posting its first weekly dip in nearly two months on Friday.
In other metals, spot platinum was down 0.3% at $894.47 per ounce and palladium fell 0.6% to $965.53. Silver lost 0.6% to $22.81 per ounce.
(Reporting by Sherin Elizabeth Varghese in Bengaluru; Editing by Mrigank Dhaniwala and Sonia Cheema)
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