Hawkish Fed, stronger dollar set gold up for longest monthly losing spree

Oct 31 (Reuters) – Gold edged lower on Monday and was headed for its longest streak of monthly losses on record as a stronger dollar, elevated US bond yields and prospects for more rate hikes from the Federal Reserve dented the non-yielding metal’s appeal.

Spot gold fell 0.4% to USD 1,635.64 per ounce by 2:18 p.m. ET (1818 GMT), and was set for its seventh straight monthly decline, down about 1.5% this month.

US gold futures settled down 0.3% to USD 1,640.70.

A combination of factors from the expected rate hikes, the relative strength of the dollar and rising yields continue to pressure gold prices, said David Meger, director of metals trading at High Ridge Futures.

The dollar index rose 0.7%, making gold more expensive for other currency holders. The benchmark 10-year Treasury yields also edged up.

The Fed is widely expected to increase interest rates by 75 basis points at the policy meeting on Nov. 2. Traders will be keen on the Fed’s commentary on future rate hikes amid debate over when to downshift to smaller rate hikes.

Gold is highly sensitive to rising US interest rates, as that increase the opportunity cost of holding it. Gold prices have fallen more than USD 400 since scaling above the USD 2,000 per ounce level in March.

Spot silver fell 0.3% to USD 19.17 per ounce.

Platinum fell 2% to USD 925.52, but was headed for its biggest monthly gain since February 2021.

“We believe platinum’s wide discount to palladium should support substitution in the car industry and lift prices over the next 12 months,” UBS analysts said in a note.

Meanwhile, palladium slipped 2.6% to USD 1,850.03 and was set for its biggest monthly drop since May.

“Weaker industrial demand due to slower economic growth in Europe and the US and substitution from palladium to platinum will weigh on prices,” UBS analysts said.

(Reporting by Seher Dareen and Brijesh Patel in Bengaluru; Editing by Shailesh Kuber and Shinjini Ganguli)