Gold gains on dollar retreat; Fed rate hike in focus

Gold prices edged higher on Monday as the U.S. dollar pulled back slightly, although the gains were capped by expectations of aggressive rate hikes by the Federal Reserve.

Spot gold rose 0.3% to $1,711.67 per ounce by 0111 GMT, after falling to a near one-year low last week. U.S. gold futures gained 0.2% to $1,708.00.

The dollar retreated after hitting a near 20-year high last week against its rivals, making greenback-priced bullion more expensive among buyers holding other currencies.

Fed officials signaled Friday they will likely stick with a 75-basis-point interest rate increase at their July 26-27 meeting, though a recent high inflation reading could still warrant larger increases than anticipated later in the year.

The European Central Bank is expected to raise interest rates by 25 basis points at its policy meeting later this week.

IMF Chief Kristalina Georgieva on Saturday warned officials from the Group of 20 major economies to take urgent action to combat inflation, warning that the “exceptionally uncertain” global economic outlook could turn worse if higher prices persisted.

Although gold is seen as an inflation hedge, higher rates hurt the appeal of bullion, which bears no interest.

Asian shares inched higher after a much-needed bounce on Wall Street, but nerves are stretched ahead of a near-certain rate hike in Europe and another round of corporate earnings reports.

The European Commission, the EU executive, formally proposed on Friday its latest package of sanctions against Moscow, including an import ban on Russian gold.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.26% to 1,014.28 tons on Friday from 1,016.89 tons on Thursday.

Spot silver rose 0.2% to $18.72 per ounce, platinum was steady at $850.77, and palladium climbed 1.7% to $1,860.26.