Gold prices edged higher on Monday, supported by a slight pullback in the U.S. dollar and Treasury yields, although bullion's outlook remained vulnerable to aggressive interest rate hikes by major central banks.
Spot gold was up 0.2% at $1,854.83 per ounce, as of 0554 GMT, while U.S. gold futures rose 0.4% to $1,857.60. Gold was still trading below last week's near one-month highs with prices dropping about 1% on Friday after data showed U.S. employers hired more workers than expected in May.
The U.S. Federal Reserve is on track for half-a-point interest rate hikes at June and July policy meetings, and Friday's jobs report raised the possibility even beyond. "Coming after the recent U.S. job report, market participants will continue to be highly sensitive to any cues on central banks' policy outlook, with guidance from the RBA and ECB on watch this week, along with the key U.S. CPI data," said Yeap Jun Rong, a market strategist at IG.
The U.S. CPI data this Friday will be the next focus for further signals about the Fed's tightening path. Investors also ramped up their bets on European Central Bank's interest rate rises this year, and priced in a bigger, 50 basis-point hike at one of the bank's policy meetings by October.
Higher rates raise the opportunity cost of holding gold, which yields no interest, while safe-haven bullion is also viewed as a hedge against inflation. "Gold is benefiting from the Russia-Ukraine conflict and China's zero-COVID policy, which have resulted in increased geopolitical uncertainties, inflation concerns, and recession fears as central banks look to raise rates to cool demand and tamp down inflation," Fitch Group said in a note dated Friday. Elsewhere, silver climbed 1.4% to $22.22 per ounce and palladium was trading at $2,028.81.
Platinum prices were around $1,019.75 per ounce, after hitting its highest since late March at $1,032.50 on Friday.
(Reporting by Swati Verma in Bengaluru; Editing by Rashmi Aich and Sherry Jacob-Phillips)