Gold prices were pinned near a 2-1/2-year low on Monday, pulled down by a firmer US dollar and as major central banks adopted an aggressive stance on interest rates to tame inflation.

Spot gold was down 0.3% at $1,637.85 per ounce, as of 0415 GMT. Prices fell as much as 1% earlier in the session to hit $1,626.41, their lowest level since April 2020.

US gold futures fell 0.6% to $1,645.00.

The dollar index, which gauges the greenback versus six peers, scaled a fresh peak since 2002 boosted by a plunge in British sterling.

Gold sinks to more than 2-year low

“It’s very difficult to construct a bullish case for gold, not until we see a pivot with the Fed especially with (other) central banks tracing up with the Fed as well,” said City Index analyst Matt Simpson.

When the recession becomes a reality, there’s a chance there for gold to get its safe-haven status back as the Fed won’t be hiking anymore, Simpson added.

The US central bank and a number of other major central banks raised interest rates last week, triggering concerns over its impact on growth.

A survey showed on Friday a downturn in business activity across the euro zone deepened in September.

Meanwhile, Atlanta Fed President Raphael Bostic said on Sunday he still believes the US central bank can tame inflation without substantial job losses given the economy’s continued momeReuters

Higher US interest rates dull the zero-yielding bullion’s appeal while bolstering the dollar in which gold is priced.

Gold prices have fallen more than 20% since scaling above the key $2,000 per-ounce mark in March.

Indicative of sentiment, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell to 30,454,517 ounces on Friday, its lowest since March 2020.

Spot silver shed 1.6% to $18.54 per ounce, having earlier fallen to its lowest in more than two weeks. Platinum rose 0.5% to $858.40 and palladium was 0.9% higher at $2,084.79.