Gold prices fell around 0.50% on Monday as the US dollar remained steady. The decline came despite growing confidence that the Federal Reserve (Fed) will take a less aggressive stance after last week's US jobs report showed a more pronounced weakness than expected.
At 9 am, gold prices were trading at $4,140, down 0.60% since it opened in early trade Tuesday in the Asian session.
In the United States, service sector activity expanded at a slower pace as the ISM Services PMI fell to 54.0 from 54.5. While the employment index showed an increase, the price component continued to slow, reflecting easing inflationary pressures.
The data further strengthened sentiment after the weaker-than-expected June Non-Farm Payroll (NFP) report, in addition to downward revisions to April and May data. The development increased expectations that the Fed will not need to raise interest rates anytime soon.
The market now expects the Fed to keep interest rates on hold at the July meeting with a probability of around 77%. As for the December meeting, expectations for a rate hike are diminishing as traders continue to reduce bets on tighter monetary policy.
Meanwhile, the US Dollar Index (DXY) rose slightly to 100.90, while the 10-year US Treasury yield remained steady at 4.451%. The strengthening dollar continued to limit gold's gains as the precious metal became more expensive for holders of other currencies.
Geopolitical factors also received less attention from the market despite the second round of talks between the United States and Iran scheduled to take place this weekend.
Investors' attention is now shifting to the Fed meeting minutes, weekly jobless claims data and the US Consumer Price Index (CPI) report, which will be important indicators of the direction of the Fed's monetary policy.
