Investing.com– Gold prices retreated slightly Monday, continuing to trend lower after suffering heavy losses last week on the back of the Federal Reserve's more hawkish stance.
At 08:40 ET (13:40 GMT), Spot Gold was 0.1% lower at $2,618.31 per ounce, and Gold Futures expiring in February fell 0.5% to $2,632.09 an ounce.
The yellow metal lost 1% last week after the Fed officials projected fewer interest rate cuts in 2025 in the face of sticky inflation. This hawkish tilt had bolstered the US dollar and created downward pressure on gold prices.
Gold prices remain under pressure after Fed meeting, markets mull over PCE data
Gold prices had hit a one-month low on Wednesday, as the markets lowered expectations for the number of Fed rate cuts in 2025.
Markets now expect the first cut of 2025 to come in June, and are pricing in roughly two reductions in the upcoming year, according to CME FedWatch Tool.
Higher interest rates put downward pressure on gold as the opportunity cost of holding gold increases, making it less attractive compared to interest-bearing assets like bonds.
US data released on Friday showed that PCE price index data—Fed’s favored inflation gauge —rose 0.1% in November, a slower pace from October's 0.2% increase. This brought the annual PCE inflation rate to 2.4%, slightly below estimates of 2.5%.
However, the annual increase in core inflation, excluding volatile food and energy, remained at 2.8%, well above the central bank's 2% target.
Other precious metals were higher on Monday. Platinum Futures rose 0.9% to $944.60 an ounce, while Silver Futures gained 0.9% to $30.218 an ounce.
Dollar remains near 2-year high
The Fed’s hawkish shift provided renewed strength to the US dollar, as higher interest rates make the greenback more attractive due to increased returns on dollar-denominated assets.
The US Dollar Index rose 0.6% on Monday and hovered near a two-year high it reached on Friday.
A stronger dollar often weighs on gold prices as it makes the metal more expensive for buyers using other currencies.
Copper rises on soft US inflation, markets await China stimulus
Among industrial metals, copper prices edged higher on Monday after falling more than 1% last week as softer inflation data in the US boosted sentiment.
The red metal has also been under pressure from a strong dollar after the Fed’s meeting.
Markets are awaiting details on new stimulus measures in China, as recent reports suggested Beijing will ramp up fiscal stimulus in the coming year. The country is the world's biggest copper importer.
Benchmark Copper Futures on the London Metal Exchange rose 0.1% to $8,960.50 a ton, while one-month Copper Futures climbed 0.6 at $4.1063 a pound.
(Peter Nurse contributed to this article.)