Gold drops nearly 1% as strong dollar pressures bullion recovery

Gold prices in India dropped nearly 1% on Monday, falling to Rs 1.49 lakh per 10 grams in futures trading. The decline was driven by a stronger US dollar, which limited bullion's recovery. On the Multi Commodity Exchange (MCX), December delivery gold fell Rs 1,020, or nearly 1%, to Rs 1,49,370 per 10 grams. The metal had already lost Rs 2,887, or 2%, in the previous week, closing at Rs 1.5 lakh per 10 grams.

Analysts noted that gold has been in a consolidating phase due to the stronger dollar and elevated bond yields. The dollar index hovered near an 18-month high of 102.37, adding pressure on bullion. Globally, Comex gold futures for December delivery traded slightly higher at USD 4,163.50 per ounce in New York, after briefly crossing USD 4,200 on Friday.

Investors have reduced expectations of a Federal Reserve rate hike in October to below 20%, but still price in nearly a 70% chance of a December hike. Last week, international gold prices fell USD 158.9, or 3.7%, to close at USD 4,162.3 per ounce, while silver dropped USD 4.38, or 6.7%, to USD 60.41 per ounce.

Analysts cautioned that gold's recovery is constrained by elevated US Treasury yields, which remain around 5.2%. They also noted that upcoming economic data, including the Services PMI and US trade figures, could influence precious metal prices. Additionally, the unresolved US-Iran situation may add volatility to the market.