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Gold prices fall as dollar strengthens, focus on important US economic data this week

Gold prices dropped as the dollar gained strength against other currencies, while investors awaited important US data set to be released on Friday, which could provide insights into the Federal Reserve’s forthcoming interest rate decision later this month.

In early Asia trading on Monday, bullion was priced at around $2,630 per ounce after experiencing a nearly 3% decline last week. The dollar rose against the euro amid increasing political tensions in France, while the yen lost ground as US Treasury yields climbed higher. A stronger dollar makes gold more expensive for purchasers using other currencies, and rising yields generally exert pressure on gold due to its lack of interest payments.

The decline in gold prices last week was influenced by a diminished demand for safe havens following a US-mediated cease-fire agreement between Israel and Hezbollah that took effect mid-week. Nonetheless, concerns regarding the escalation of Russia’s ongoing conflict in Ukraine continue to bolster demand for safe-haven assets like gold.

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Markets are gearing up for the release of US nonfarm payroll figures later this week, which may impact the Fed’s interest-rate choice on December 18. Current market expectations indicate approximately a 70% likelihood that the US central bank will lower benchmark borrowing rates by a quarter percentage point. Typically, lower borrowing costs are advantageous for gold since it does not yield interest.

The precious metal has increased by about 30% thus far this year, with gains fueled by the US Fed’s monetary policy easing, purchases by central banks, and rising geopolitical and economic uncertainties. Some analysts anticipate new record highs in 2025, with both Goldman Sachs Group and UBS Group AG providing optimistic forecasts last month.

As of 10:36 a.m. in Singapore, spot gold had dipped 0.4% to $2,632.22 per ounce. The Bloomberg Dollar Spot Index rose by 0.4%. Prices for silver, platinum, and palladium also saw declines.

© 2024 Bloomberg

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