Gold Retreats as Investors Eye Inflation Data Ahead of Key Fed Decision

Gold prices retreated on Monday after reaching a seven-week high on Friday, as investors locked in gains from last week's rally. Spot gold fell 0.5% to $4,322.28 an ounce by 2 am GMT, while US futures declined 0.4% to $4,381.60.

The unexpected contraction in US payrolls drove Treasury yields lower and reduced expectations for another near-term rate increase. Friday's employment report showed a 23,000 decline in nonfarm payrolls in July, with May and June payroll growth revised lower by a combined 103,000.

This shift is important for gold because it reduces the opportunity cost of holding the metal, which produces no income. When investors expect policy rates and bond yields to remain lower, they are more likely to invest in gold.

KCM Trade chief market analyst Tim Waterer views Monday's retreat as profit-taking rather than evidence that the broader recovery has broken down. He believes that the $4,300 area can continue to provide support for gold, provided incoming inflation figures do not revive expectations for tighter monetary policy.