Gold prices fell on Monday to their lowest in four weeks, as bets for an increasingly aggressive and hawkish U.S.
Federal Reserve approach to tightening monetary policy boosted the dollar and pressured demand for bullion. Spot gold was down 0.7% at $1,916.41 per ounce, as of 0545 GMT, earlier hitting its lowest since March 29 at $1,914.58. U.S. gold futures were down 0.9% at $1,917.40.
Although the 10-year U.S. Treasury yield is nearing 3% and theoretically that's supposed to be a tipping point for gold, it is more about real yields that are starting to catch up and that will weigh on gold, said Stephen Innes, managing partner at SPI Asset Management. With expectations for a half-percentage point interest rate hike at the Fed's May meeting now locked in, traders on Friday piled into bets that the U.S. central bank will go even bigger in subsequent months.
Gold is highly sensitive to rising U.S. short-term interest rates and higher yields, which increase the opportunity cost of holding non-yielding bullion. It is, however, seen as a safe store of value during economic and political crises.
Gold still has some intrinsic value when economies slow because then, banks don't want to raise interest rates, Innes said, adding: "The market is pricing in rates, rates, rates. But what happens if the economy starts tanking very aggressively?"
The dollar firmed near its highest in two years, making greenback-priced gold costlier for other currency holders. Spot gold may test a support at $1,915 per ounce, with a good chance of breaking below this level and falling towards $1,889, according to Reuters' technical analyst Wang Tao.
Spot silver dipped 1.7% to an over two-month trough of $23.73 per ounce, and palladium fell 3.1% to $2,302.19. Platinum eased 0.8% to $923.00, its lowest since mid-December last year.
(Reporting by Bharat Govind Gautam in Bengaluru; Editing by Sherry Jacob-Phillips and Uttaresh.V)