Gold dips to 7-month low on dollar strength, focus shifts to US data

Gold extended losses on Monday for the sixth consecutive session to hit a near seven-month low, as the dollar stayed strong, with traders digesting a key US inflation report as they positioned for a slew of job market data due this week.

Spot gold dropped 0.4% to $1,840.49 per ounce by 0545 GMT, its lowest since March 10. US gold futures GCcv1 shed 0.5% to $1,856.20.

Last week, bullion posted its biggest weekly decline since June 2021 to end the third quarter 3.7% lower.

"The data out of the US is getting softer and the US Federal Reserve's squeeze is starting to show up in more and more places," said Ilya Spivak, head of global macro at Tastylive.

"If the data starts looking weak this week, gold might find an attempt to carve out a bottom."

The dollar held near a 10-month high, while Treasury yields were off a 16-year peak. 

Underlying US inflation moderated in August, data on Friday showed, with the core personal consumption expenditures (PCE) price index, a measure of inflation closely watched by the Federal Reserve, now averaging near its 2% target for the last three months.

New York Fed President John Williams said the central bank may be done with rate rises as inflation pressures, while still elevated, are moving back toward the official target.

Higher rates raise the opportunity cost of holding bullion, which is priced in dollars and does not yield any interest.

Markets see a 45% chance of another rate hike this year, but also a 43% chance of some policy easing in the first half of 2024, according to the CME FedWatch Tool.

Spot silver XAG= slid 2.1% to an over six-month low of$21.69 per ounce, while platinum XPT= fell 0.4% to $900.71 and palladium XPD= eased 1.1% to $1,232.11.