Investing.com - Gold prices were under pressure during European hours on Monday, slumping to a five-week low amid indications the Federal Reserve is gearing up to hike interest rates as early as next month.
Gold for December delivery on the Comex division of the New York Mercantile Exchange touched an intraday low of $1,317.20 a troy ounce, a level not seen since July 26. It was last at $1,320.95 by 3:02AM ET (07:02GMT), down $4.95, or 0.37%.
During a much-awaited speech at the Fed's Jackson Hole symposium Friday, Fed Chair Janet Yellen said the case for U.S. interest rate hikes has “strengthened” in recent months due to improvements in the labor market and to expectations for solid economic growth.
However, she did not indicate when the Fed would act, saying that higher interest rates will depend on incoming economic data.
Speaking shortly afterwards, Fed Vice Chair Stanley Fischer said Yellen’s speech was “consistent” with expectations for possibly two more rate hikes this year, opening the door to a September hike.
According to Investing.com's Fed Rate Monitor Tool, investors are pricing in a 36% chance of a rate hike by September, up from 21% before Yellen and Fischer spoke. December odds were at around 63%, compared to 50% Friday morning.
The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar in which it is priced.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, jumped to a daily peak of 95.59, the most since August 16, as investors began to price in a greater likelihood that the Fed will raise rates this year. It was last at 95.55 early on Monday.
A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
In the week ahead, investors will focus on U.S. economic reports to gauge if the world's largest economy is strong enough to withstand a hike in interest rates in the coming months, with Friday’s nonfarm payrolls data in the spotlight.
Underscoring the importance of the upcoming jobs report, Fischer said the data will influence the central bank’s decision on whether to hike rates in the coming weeks.
Also on the Comex, silver futures for September delivery dipped 14.1 cents, or 0.76%, to trade at $18.51 a troy ounce during morning hours in London, while copper futures inched up 0.3 cents, or 0.12%, to $2.087 a pound.