By Brijesh Patel
(Reuters) – Gold prices were on the backfoot on Monday after Federal Reserve Governor Michelle Bowman indicated that additional interest rate hikes would likely be needed to rein in inflation.
Spot gold was down 0.3% at $1,936.44 per ounce by 03:28 p.m. EDT (1928 GMT). U.S. gold futures settled 0.3% lower at $1,970.00.
Bowman, in remarks prepared for delivery to a “Fed Listens” event in Atlanta that largely repeated comments she made to a banking group on Saturday, said she backed the latest interest rate increase because inflation remains too elevated.
“The dollar index and Treasury yields drafted a bit higher on that and gold futures having a muted to lower reaction,” said Phillip Streible, chief market strategist at Blue Line Futures, in Chicago. [US/] [USD/]
“If we get lower-than-expected CPI data, we could get some of these Fed officials to stop with their hawkish outlook on rate hikes and we have a much better shot at getting some stabilization in prices.”
John Williams, president of the Federal Reserve Bank of New York, expects that interest rates could begin to come down next year, the New York Times reported.
Although gold is seen as a hedge against inflation, higher interest rates increase the opportunity cost of holding non-yielding bullion.
Focus this week will be on U.S. consumer price index (CPI) data due on Thursday that could offer more clarity on the Fed’s policy stance.
“Our expectation is still that the trend points to low inflation and therefore the Fed doesn’t have to hike rates,” UBS analyst Giovanni Staunovo said.
Silver fell about 2.2% to $23.09 an ounce, while platinum slipped 0.1% to $920.89. Palladium dropped 1.2% to $1,241.20.
“Palladium prices could be near a temporary bottom as supply risks could resurface driven by geopolitical tensions,” Intesa Sanpaolo economist Daniela Corsini wrote in a note.
(Reporting by Brijesh Patel and Anjana Anil in Bengaluru; Editing by Maju Samuel and Shailesh Kuber)