Gold prices dipped slightly at the start of the week

Global gold prices saw a slight decline on Monday for the third consecutive session, trading at around $4,060 per ounce. This comes as the US dollar climbed to its highest level in six months, with investors awaiting further US economic data for clearer indications of the Federal Reserve's policy outlook.

The rising dollar is putting pressure on the precious metal

The US Dollar Index (DXY) held near its highest level in six months, surpassing the 100-point mark.

Analysts suggest that if the index remains above this critical level, it could increase pressure on gold prices, given the traditional inverse relationship between the precious metal and the US dollar.

Awaiting US economic data

Investors are focused on a series of US economic data releases scheduled for this week, which should provide a clearer picture of the Federal Reserve's monetary policy direction. Key data releases include:

- Tuesday: Retail sales and Producer Price Index (PPI) data for September

- Wednesday: Weekly jobless claims figures

A sudden shift in interest rate expectations

Market expectations for interest rates have shifted significantly, with the probability of a 25-basis-point rate cut in December rising to around 70%, compared to just 40% last Thursday.

This follows comments from Federal Reserve Vice Chairman John Williams indicating his support for a near-term rate cut.

Divergent stances among Fed officials

While there appears to be a growing consensus on lowering rates, some committee members maintain a more hawkish position. Lori Logan, president of the Dallas Federal Reserve Bank, advocated keeping interest rates unchanged for a longer period, while the presidents of the Chicago and Cleveland Federal Reserve Banks warned of the potential risks of cutting rates now to the US economy.

Gold and interest rates have a historically inverse relationship

Gold, as a non-yielding asset, tends to perform well in low interest rate environments, where competitive pressure from fixed-income assets like bonds is reduced.