Gold Falls Below $1,800 As Further Fed Concerns Arise

Stronger-than-expected U.S. data boosted the dollar and heightened worry about the U.S. economy and the Fed's response.

The dollar rose for the first time in four sessions on Monday, rebounding from a five-month low. U.S. factory orders and services sector data showed better-than-expected economic performance, which might fuel inflation.

This could require the Fed to hike rates longer than expected, especially if inflation remains high. The Fed has forecast slower rate hikes in the coming months but warned rates may peak higher than expected.

Such a circumstance would hurt most non-yielding assets, especially gold. Next week is the Fed's final 2022 meeting.

Spot gold was near $1,769.30 per ounce, and gold futures were at $1,781.55 per ounce. Monday was the worst day for both instruments in three months, falling 1.7%.

Rising interest rates pushed gold prices lower this year as higher debt yields increased the potential cost of holding gold. Despite rebounding from early-year lows, gold's prospects are limited by the volatility of U.S. interest rates.

After a dramatic drop Monday, other precious metals remained quiet Tuesday. Platinum fell 0.1%, while silver futures stayed at $22.422 per ounce. Monday, both metals fell 2.4% and 4.4%.

Copper prices reversed Monday's early gains as rising interest rates overshadowed optimism about Chinese demand.

Copper futures were steady after sliding 2% the day before.

Despite gold's spectacular comeback in the past two weeks due to rising optimism about China's anti-COVID actions, the recovery looks to have been cut short by concerns that higher interest rates may further hinder economic activity.

China hasn't said it will cut back its entire zero-COVID program; so far, it's simply reduced some steps in its largest cities.