Gold prices continue to decline despite longer-term increases in rates

Amidst growing speculation that the Federal Reserve will maintain higher interest rates for an extended period, gold prices declined during Asian trading on Monday. Nevertheless, the yellow metal managed to remain above crucial levels due to safe-haven demand and short-term dollar weakness.

In January, traders unwound bets that the Fed would start lowering interest rates as early as March 2024, which led to a sharp increase in profit-taking and a sharp decline in gold prices. This unravelling reached a boiling point late last week as the yellow metal nearly broke below the $2,000 per ounce mark.

But in the midst of escalating hostilities in the Middle East, demand for safe haven assets surged, which bolstered gold’s support at that level. Additionally supporting metal prices was some short-term profit-taking in the dollar, which dropped on Monday from a low of more than one month.

However, the possibility of longer-term, higher U.S. rates continued to put pressure on gold. The spot price of gold dropped by 0.3% to $2,022.91, while the price of gold futures expiring in February dropped by 0.2% to $2,024.30.

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