Gold touches two-month low as rate expectations dull outlook

Gold prices hit their highest since April 2022 this month, but have since fallen by more than 7 percent (Representative image: Reuters)

Gold fell to a two-month low on Monday as strong U.S. economic data sparked concern over further increases to interest rates by the Federal Reserve, clouding the outlook for zero-yielding bullion.

Spot gold was steady at $1,811.60 an ounce by 1236 GMT, having earlier hitting its lowest since late December at $1,806.50. U.S. gold futures were unchanged at $1,817.20.

"Given how the Fed's favoured measure of inflation accelerated in January, appetite for zero-yielding gold may be soured by rate-hike bets in the near term, ultimately dragging prices lower," said Lukman Otunuga, senior research analyst at FXTM.

"Gold (will) remain highly sensitive to chatter by Fed officials, key economic data and any topic relating to inflation as we head into the new month."

Data on Friday showed U.S. consumer spending increased by the most in nearly two years in January, while inflation accelerated, adding to market fears that the Fed could continue raising interest rates into summer.

Gold prices hit their highest since April 2022 this month, but have since fallen by more than 7% after a slew of U.S. data pointed to a resilient economy.

The dollar index slipped 0.1% but was hovering near a seven-week peak.

Top consumer China's net gold imports via Hong Kong fell in January by about 47% from the previous month.

Spot silver lost 0.1% to $20.74 an ounce.

"Despite potential recessions, silver photovoltaic demand is expected to reach a record in 2023," Heraeus Precious Metals analysts said in a note.

"In 2023 silver powder imports into China are set to bounce higher as manufacturing ramps up. How much this supports the silver price may depend on how the overall economic environment develops over the year."

Platinum was up 1.7% at $925.17 and palladium gained 1.9% to $1,430.38.