Gold drops 3.54% to a seven-week low on Fed rate bets

Gold futures fell more than 3% on Monday, September 28, dropping to their lowest level in seven weeks. On the Comex division of the New York Mercantile Exchange, the most active gold contract for December delivery closed down 3.54% at $4,168.40 per troy ounce. December silver dropped 4.76% to settle at $61.71 per troy ounce.

The prospect of tighter monetary policy from the Federal Reserve pushed US Treasury yields higher. Rising yields reduced the appeal of gold, which pays no interest. Swissquote Bank noted that upcoming US data, including the personal consumption expenditures price index and the nonfarm payrolls report, could reinforce bets on Federal Reserve rate increases if they show high inflation and a strong labour market.

Analysts at Saxo Bank stated that a large share of the selling occurred during Asian trading hours. They noted this move likely reflected profit-taking by Chinese investors ahead of the Golden Week holiday starting on Thursday, October 1.

In the mining sector, Australia's Northern Star Resources rejected a $27.2 billion takeover bid from South Africa's Gold Fields. The transaction would have created the world's second-largest gold producer. Northern Star Resources called the offer highly opportunistic and said it significantly undervalued Australia's largest gold miner.