Gold prices traded lower during Asian trading on Monday, extending losses after posting a fourth consecutive weekly decline, as a strong United States dollar and expectations of further Federal Reserve interest rate hikes weighed on the precious metal.
By 3:55 pm AEST (5:55 am GMT), spot gold was trading lower, reversing part of a two-day recovery from seven-month lows.
The U.S. dollar remained on track for its strongest monthly performance in nearly a year as renewed uncertainty surrounding the ceasefire between the United States and Iran boosted demand for the world's reserve currency.
Over the weekend, Washington and Tehran exchanged fresh military strikes and accused one another of violating the ceasefire before later agreeing to halt hostilities and meet in Qatar on Tuesday for renewed negotiations.
Although hopes for fresh peace talks helped ease oil prices, investors continued to favour the U.S. dollar over gold as geopolitical risks remained elevated.
Gold also remained under pressure from growing expectations that the Federal Reserve will continue tightening monetary policy, with markets pricing in additional interest rate hikes before the end of the year, according to the CME Group FedWatch Tool.
Higher interest rates tend to reduce the appeal of non-yielding assets such as gold by increasing the opportunity cost of holding bullion.
Attention later this week will shift to the U.S. nonfarm payrolls (NFP) report, due on Thursday (Friday AEST), which is expected to provide fresh insight into the strength of the labour market and influence expectations for the timing and extent of future Federal Reserve policy moves.
As gold typically benefits from lower interest rates, any signs of continued labour market resilience could reinforce expectations for tighter monetary policy and place additional pressure on bullion prices.
Investors will also monitor discussions at the European Central Bank's annual forum in Sintra, Portugal. Particular focus will be on Wednesday, when Federal Reserve Chair Kevin Warsh is scheduled to participate in a key policy panel.
The appearance follows Warsh's unexpectedly hawkish debut as Federal Reserve chair earlier this month, reinforcing market expectations that U.S. monetary policy could remain restrictive for longer.
