Gold Prices Slip on Hawkish Fed Outlook and Stronger US Dollar

Gold prices slipped on Monday as expectations of additional Federal Reserve rate hikes and a firmer US Dollar kept buyers cautious. The metal had been on a two-day winning streak, but its upside was limited by the hawkish Fed outlook. At the time of writing, XAU/USD traded around $4,350 during American trading hours after touching an intraday low of $4,322.

The US Dollar Index (DXY) also weighed on gold prices, trading around 100.40, below the seven-week high of 100.56 touched on Friday. The updated dot plot points to at least one more rate hike this year, supporting the Greenback and keeping Treasury yields elevated. Chicago Fed President Austan Goolsbee said he is 'optimistic that the Fed could get back on a path to 2% as long as there is no more evidence of demand overheating.' He added that he would have no problem with interest rates moving lower if there is 'convincing evidence inflation is heading back to 2%.'

Oil prices, however, fell due to signs of diplomatic efforts surrounding the war in the Middle East and improving energy flows from Saudi Arabia. West Texas Intermediate (WTI) Oil traded around $92, its lowest level in more than a week. The energy shock has pushed major central banks towards tighter monetary policy, with the Fed raising interest rates by 25 basis points last week.