Gold hovered near 3-week lows below $1,800 on Monday, weighed down by firmer bond yields as traders braced for a more aggressive monetary tightening by the Federal Reserve in a bid to tame high inflation. US Treasury yields topped 1.8% last week following hawkish minutes from the Fed’s December meeting.
It revealed the central bank discussed reducing its balance sheet in another move to aggressively dial back pandemic-era stimulus, after previously signaling three interest rate hikes this year. Although investors view gold as a hedge against inflation, higher interest rates raise the opportunity cost of holding non-yielding bullion. Meanwhile, traders await December US inflation data that could reinforce the Fed’s hawkish stance after weaker jobs data.