Gold prices weakened on Monday, back toward a 29-month low hit on Friday, as the dollar and Treasury yields rose on expectations the U.S. Federal Reserve will deliver a steep interest rate hike when it meets this week.
Spot gold was up slightly at 0.01% to $1,675.1667 an ounce, holding above its lowest since April 2020 hit on Friday. U.S. gold futures fell 0.06% to $1,684.50.
"(Gold) is still hanging around its lows and a big part of this is anticipation of the Fed announcement on Wednesday," said Daniel Pavilonis, senior market strategist at RJO Futures, adding that higher Treasury yields were also pressuring prices.
The Fed, at the conclusion of its two-day policy meeting on Wednesday, is expected to raise interest rates by 75 basis points to combat stubbornly-high inflation, with markets even seeing a 20% chance for a 100 bps increase.
Concerns about surging inflation have also prompted other central banks to tighten monetary policy.
Although gold is considered a hedge against inflation, higher interest rates lift the opportunity cost of holding zero-yield bullion.
The dollar held close to two-decade highs, making greenback-priced bullion more expensive for overseas buyers.
Benchmark 10-year U.S. Treasury yields rose to their highest in over 11 years.
"What is driving the hesitation for scaling into a long-term position with gold is that investors are not convinced that even when the Fed pauses, that might not guarantee they are done hiking (interest rates)," Edward Moya, senior analyst with OANDA, said in a note.
Elsewhere, spot silver lost 0.26% to $19.509 an ounce, while platinum rose 1.37% to $917.3763 and palladium gained 4.18% to $2,223.5552.
The bullion market in London — the world's biggest trade center for physical gold — was closed for Queen Elizabeth's funeral which limited trade volumes on Monday.