Gold prices fell anew on Monday and headed for the highest monthly drop in four months. The anticipation of an aggressive rate hike by the Federal Reserve weighs on the bullion. The stronger dollar also pulled the yellow metal down. The greenback lingers near an 18-month peak hit on Friday.

Spot gold is currently trading at $1,788.06 per ounce as of 0801 GMT.

The Fed plans to implement the first rate hike in March. According to central bank officials, the inflation risks have more serious, and they need to raise borrowing costs faster than expected. Data shows that the employment index rose 4% on a year-on-year basis in the fourth quarter, and the personal consumption expenditures index jumped 5.8% year-on-year in December.

Image Source: Pixabay

The rate hike at the March-15-16 FOMC meeting is virtually assured at this point. The only thing to be determined is the size of that increase. Some analysts expect the Fed to opt for the half-percentage-point to tighten credit faster and show it is serious in lowering inflation.

Stephen Innes, the managing partner of SPI Asset Management, suggested that the key factor this is week is the non-farm payroll data. If the figure is higher than the expected 100,000-150,000 new jobs, it could raise the chances of a 50-basis point rate hike in March.

Meanwhile, market participants are monitoring the upcoming central bank meetings in Australia, the UK and the European Central Bank. Innes said a rate hike by the Bank of England could hold back the dollar’s upward momentum, which would be positive for gold.

On the technical front, Reuters analyst Wang Tao predicted spot gold to test a resistance at $1,803 an ounce.

DailyFX strategist Margaret Yang noted that gold is heading for a price consolidation period. Bullion prices have fallen for the fourth consecutive session and lost a total of 2.36% last week. Gold is considered an inflation hedge and a safe haven in times of economic and geopolitical uncertainty. But the Fed tightening appears to have overshadowed the impact of the rising inflation rate and the Russia-Ukraine tension.

Yang expects gold to test trendline support at $1,784 per ounce. A fall below that below could send the bullion further down to $1,750 for support. She also mentioned that the MACD indicator had formed a bearish crossover, which indicates downward momentum.