Gold rebounds but holds below $1,900 on Fed fears, firm dollar

Gold prices regained some ground on Monday but a firmer dollar and concerns that the US Federal Reserve might keep hiking interest rates kept bullion below the key $1,900-an-ounce level.

Spot gold was up 0.6 per cent at $1,876.61 per ounce, as of 0540 GMT, after hitting its lowest level since Jan. 6 earlier in the session. US gold futures rose 0.7 per cent to $1,888.80.

Bullion prices had dropped more than 2 per cent on Friday after data showed US job growth accelerated sharply last month and the unemployment rate hit a more than 53-1/2-year low of 3.4 per cent.

"Markets were initially looking for the first (rate) cut to come in 3Q 2023 (post-FOMC but prior to non-farm payrolls release), but expectations for the first cut have now been pushed back to November-December 2023," said OCBC FX strategist Christopher Wong.

"Markets are now expecting the Fed to keep peak rate (still around 5%) on hold for longer. This could depress gold's appeal in the interim."

Those bets helped the dollar index rise 0.2 per cent, adding pressure on gold by raising its cost for buyers holding other currencies.

Rising US interest rates tend to dim the appeal of gold as they increase the opportunity cost of holding the non-yielding asset while boosting the dollar, in which bullion is priced.

"We see (gold) prices ranging between $1,820-$1,950, but looking ahead, we are more constructive, especially once focus reverts (as we think it will) to the likelihood of falling rates and a weaker dollar," Edward Meir, a metals analyst at Marex, wrote in a monthly note.

Spot silver rose 0.5 per cent to $22.47 per ounce, platinum edged up 0.1 per cent to $973.45 and palladium added 0.3 per cent to $1,628.63.

"Among PGMs, supply disruptions in South Africa due to a deepening energy crisis should help to stabilise prices in the short term," ANZ said in a note.