Investing.com - Gold prices were under pressure in European trade on Monday, falling to a two-week low as the U.S. dollar rallied amid indications the Federal Reserve could raise interest rates as early as next month.
Gold for December delivery on the Comex division of the New York Mercantile Exchange dropped to a session low of $1,335.40 a troy ounce, a level not seen since August 9.
It was last at $1,337.35 by 2:46AM ET (06:46GMT), down $8.85, or 0.66%, after falling $11.00, or 0.81%, on Friday.
Odds for a near-term rate hike mounted after Fed vice chairman Stanley Fischer said on Sunday that the U.S. economy was close to hitting the central bank's targets for full employment and 2% inflation.
Fischer's speech was just the latest piece of hawkish rhetoric from top Fed officials. Last week, San Francisco Fed President John Williams, New York Fed Chief William Dudley and Atlanta Fed President Dennis Lockhart all said a September rate hike may be on the table.
According to Investing.com's Fed Rate Monitor Tool, investors are pricing in a 15% chance of a rate hike by September, up from just 6% at the start of last week. December odds were at around 52%, compared to 46% on Friday.
The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar in which it is priced.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.4% to 94.86 early Monday, as investors began to price in a greater likelihood that the Fed will raise rates this year.
A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
In the week ahead, market players will turn their attention to a highly anticipated speech by Fed Chair Janet Yellen at the annual meeting of top central bankers and economists in Jackson Hole, Wyoming, for fresh clues on the timing of the next U.S. rate hike.
In addition, investors will continue to focus on U.S. economic reports to gauge if the world's largest economy is strong enough to withstand a rate hike in the coming months, with Friday’s revised second quarter growth data in the spotlight.
Also on the Comex, silver futures for September delivery tumbled 45.5 cents, or 2.36%, to trade at $18.86 a troy ounce during morning hours in London, while copper futures dipped 1.6 cents, or 0.74%, to $2.151 a pound.