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Gold down about 6% in Feb
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Dollar index headed for monthly gain
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Fed rates seen peaking at 5.415% in Sept
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Silver set for biggest monthly loss since Sept 2020
Feb 28 (Reuters) -
Gold prices fell on Tuesday and were headed for their biggest monthly loss since June 2021 as impending interest rate hikes by the U.S. Federal Reserve sapped the non-yielding asset's appeal.
Spot gold was down 0.3% at $1,811.74 per ounce as of 0735 GMT, after hitting a two-month low on Monday. U.S. gold futures slipped 0.4% to $1,817.30.
Bullion is often seen as a hedge against inflation, but the opportunity cost of holding it rises when interest rates are increased to bring down inflation.
"The question is still, 'How much more to hawkish Fed repricing?' This is highly dependent on how U.S. data turns out and, in particular, if the disinflation trend can be a bit more entrenched than bumpy," said OCBC FX strategist, Christopher Wong.
"A pause in hawkish Fed repricing could see USD momentum ease and that can provide support to gold."
The yellow metal has lost about 6% so far in February, marking a steep reversal from earlier this month when it hit its highest since April 2022.
Since that high, strong economic data has shown signs of a resilient U.S. economy, prompting several Fed policymakers to back further rate hikes to curb inflation. Fed Governor Philip Jefferson said on Monday he was under "no illusion" that inflation would return quickly to the Fed's 2% target and noted that the Personal Consumption Expenditures (PCE) index remained "elevated."
Markets expect the Fed's target rate to peak at 5.415% in September.
The dollar index was poised for a monthly gain. A stronger greenback makes gold less affordable for other currency holders.
Spot silver fell 0.2% to $20.58 per ounce on the day and was set for its biggest monthly decline since September 2020.
Platinum edged up 0.1% to $939.33 and palladium added 0.2% to $1,432.84. Both metals were set to post a drop in prices for the month.
(Reporting by Kavya Guduru in Bengaluru; Editing by Sherry Jacob-Phillips and Savio D'Souza)
