Gold prices regained some ground on Monday but a firmer dollar and concerns that the U.S. Federal Reserve might keep hiking interest rates kept bullion below the key $1,900-an-ounce level.

Spot gold was up 0.4% at $1,872 per ounce, after hitting its lowest level since Jan. 6 earlier in the session. U.S. gold futures
rose 0.5% to $1,884.80.

Bullion prices had dropped about 2.5% on Friday after data showed U.S. job growth accelerated sharply last month and the unemployment rate hit a more than 53-1/2-year low of 3.4%.

“Markets were initially looking for the first (rate) cut to come in 3Q 2023 (post-FOMC but prior to non-farm payrolls release), but expectations for the first cut have now been pushed back to November-December 2023,” said OCBC FX strategist Christopher Wong.

“Markets are now expecting the Fed to keep peak rate (still around 5%) on hold for longer. This could depress gold’s appeal in the interim.”

Interest-rate futures traders are now expecting eventual Fed rate cuts to start in November versus in September previously, with rates seen peaking at 5.06% in June.

Those bets helped the dollar index
rise 0.2%, adding pressure on gold by raising its cost for buyers holding other currencies.

Rising U.S. interest rates tend to dim the appeal of gold as they increase the opportunity cost of holding the non-yielding asset while boosting the dollar, in which bullion is priced.

“We see (gold) prices ranging between $1,820-$1,950, but looking ahead, we are more constructive, especially once focus reverts (as we think it will) to the likelihood of falling rates and a weaker dollar,” Edward Meir, a metals analyst at Marex, wrote in a monthly note.