Gold pulls back as dollar rebounds on U.S. strong data

Gold prices beat a sharp retreat on Monday as the dollar shot back up on bets that strong U.S. economic readings may give the Federal Reserve fodder to accelerate rate hikes.

Spot gold dipped 1.2% to $1,775.68 per ounce by 10:36 a.m. ET (1536 GMT) after touching its highest since July 5 at $1,809.91 earlier in the day.

U.S. gold futures dropped 1.3% to $1,786.90.

Silver too was caught in gold’s slipstream, falling 3.2% to $22.38. U.S. services industry activity unexpectedly picked up in November, with employment rebounding, offering more evidence of underlying momentum in the economy as it braces for an anticipated recession next year.

The hotter-than-expected ISM data prompted a rally in the dollar index, in turn causing a selloff in gold and silver on expectations that the Fed is going to be more hawkish, said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

The dollar’s subsequent bounce made gold less attractive for bullion traders holding other currencies. On the technical front, gold “hit the 200-day moving average last night which is $1,823.90 … we’ve been pulling back since.” Gold also gave up some gains from an earlier rally, prompted by news on top bullion consumer China easing some COVID restrictions.

Gold traders were still focused on the U.S. Federal Reserve’s rate-hike path, with a recent softening of its aggressive stance giving a fillip to non-yielding bullion.

“The near-term path of gold will be strongly influenced by the upcoming US CPI data. We still look for further rate hikes weighing on gold over the coming weeks,” UBS analyst Giovanni Staunovo said.

November CPI data will be released on Dec. 13.

Platinum fell nearly 1% to $1,004.56 per ounce, while palladium was down 0.2% at $1,895.38. (Reporting by Seher Dareen, Arundhati Sarkar, Arpan Varghese in Bengaluru; Editing by Maju Samuel)