Strong dollar sets gold for worst monthly decline since September

BENGALURU (REUTERS) - Gold prices fell for a fourth consecutive session on Monday (Jan 31) and were set for their biggest monthly drop since last September, as the US dollar strengthened ahead of key central bank meetings, making bullion more expensive for holders of other currencies.

Spot gold was down 0.2 per cent at US$1,788.41 per ounce, as at 1.40am GMT, hovering near the previous session's US$1,779.20 - its lowest since Dec 16.

US gold futures were up 0.1 per cent at US$1,788.20.

The metal has declined more than 2 per cent so far this month.

The dollar index hovered close to an 18-month peak scaled last Friday.

The United States Federal Reserve plans to raise interest rates in March on the assumption that the economy will largely steer clear of a fallout from the Omicron coronavirus variant and keep growing at a healthy clip.

Although gold is considered a hedge against inflation, interest rate hikes would raise the opportunity cost of holding non-yielding bullion.

Japan's factory output shrank for the first time in 3 months in December as a decline in machinery outweighed a small rise in car production, casting a cloud over the strength of the economic recovery.

Traders are on the lookout for policy decisions from Australian, Britain and European central bank meetings expected this week.

Top Asian hubs saw firm demand for physical gold last week in the run-up to the Chinese New Year holiday, while buyers in India held off making purchases before the government announces its annual budget.

Spot silver shed 0.3 per cent to US$22.36 an ounce, while platinum was up 0.1 per cent at US$1,008.27.

Palladium fell 0.5 per cent to US$2,364.49, but the auto-catalyst metal was set for its best monthly gain since February 2008, up about 25 per cent.