The prices of gold fell on Monday because of a stronger dollar and are en route to its worst monthly performance since November 2016. Earlier in the session, spot gold reached a one-week high of $1,889.66 an ounce but later dropped by 0.5%. It has fallen by 4.3% so far this month and it is on track to its highest monthly decline since November 2016.
Spot gold is currently trading at $1,883.26 per ounce as of 0934 GMT.
On the other hand, the U.S. dollar gained 0.1% against a basket of rival currencies after the presidential debate between incumbent President Donald Trump and his Democratic opponent Joseph R. Biden Jr. The greenback is heading towards its highest monthly gain since July 2019. A stronger dollar makes the yellow metal more expensive for investors using other currencies.
According to DailyFx strategist Margaret Yang, the bullion is in a temporary market correction and consolidation phase but it is likely to rebound when the second round of U.S. fiscal stimulus is rolled out. OANDA’s senior market analyst Jeffrey Halley added that investors who purchased the yellow metal to hedge against risks related to the debate are now unwinding those hedges.
Han Tan, a market analyst with FXTM, also noted that the dollar is the investors’ preferred safe-haven asset at the moment. And its post-debate gains thwarted gold’s attempt to reach the psychologically important price level at $1,900 an ounce. But he believes that the metal is still supported by the political uncertainty surrounding the U.S. elections.
Another factor weighing on gold is the positive data on Chinese manufacturing and services sectors. Also, New York Federal Reserve President John Williams commented that the recovery of the American economy has been more robust than expected.
Meanwhile, the market is waiting for the release of U.S. GDP data for the second quarter and developments in the second round of the coronavirus stimulus package. House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin were reportedly coming to terms over the stimulus plan.