(Bloomberg) -- Gold edged lower as traders weighed the Federal Reserve's commitment to keeping monetary policy tight for some time in the wake of Chair Jerome Powell's comments on Friday.
Powell indicated at Jackson Hole that the Fed was likely to keep raising interest rates and leave them elevated to quell inflation -- even at the risk of the economy suffering. A stronger dollar and rising Treasury yields have been weighing on gold, which fell to a one-month low on Monday and is set for a fifth monthly drop.
Minneapolis Fed President Neel Kashkari told Bloomberg's Odd Lots podcast that sharp stock losses show investors had got the message, and that “people now understand the seriousness of our commitment to getting inflation back down to 2%.” The central bank will also step up the unwinding of its near-$9 trillion balance sheet this week.
Investors have continued to cut gold positions in light of the Fed's hawkish stance, with exchange-traded funds set for a fourth monthly drop in holdings, according to an initial tally by Bloomberg. Hedge funds trading the Comex also boosted their bearish bullion bets ahead of Powell's speech last week.
“The environment for gold remains difficult,” Commerzbank AG analysts, including Thu Lan Nguyen, wrote in a note. “It will probably brighten only once an end to the Fed rate hikes is in sight and rate cuts are on the cards.”
Attention will shift to US data on job openings and consumer confidence on Tuesday, ahead of the nonfarm payrolls report later in the week. Last month's print showed the labor market remaining strong, which was seen as giving the Fed the greenlight to keep raising interest rates.
Spot gold fell 0.3% to $1,732.29 an ounce as of 1:39 p.m. in London, set for a monthly drop of almost 2%. Prices fell to $1,720.45 on Monday, the lowest level since July 27. The Bloomberg Dollar Spot Index fell 0.2%. Silver, platinum and palladium also declined.
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