Gold prices extended gains to an eight-month high on Monday as a weaker dollar made greenback-priced bullion cheaper for overseas buyers, while investors bet on a less-aggressive rate-hike trajectory from the US Federal Reserve this year.

Spot gold was up 0.8% at $1,880.33 per ounce, as of 0722 GMT, its highest level since May 9, 2022. US gold futures rose 0.7% to $1,883.60.

The dollar index slipped 0.4%. “Softer US data on Friday boosted gold’s appeal.

Data suggests that Fed’s cumulative tightening in 2022 is starting to have its effects felt on the economy and that the Fed can afford to slow its pace of tightening,“ said OCBC FX strategist Christopher Wong.

Friday’s data showing a moderation in US wage gains and a December contraction in the services industry activity drove a nearly 2% gain in gold prices.

Traders will now turn to Fed Chair Jerome Powell’s speech at a central bank conference in Stockholm on Tuesday and US consumer price index data due this week for further clues on the pace of rate hikes.

“This week’s CPI data would be key. Another deceleration in price pressures could boost appetite for gold while the dollar stays under pressure. However, an unexpected uptick in CPI may unnerve sentiments,” Wong added.

Gold slips as caution sets in before key US jobs data

Higher interest rates dim gold’s allure as an inflation hedge and raise the opportunity cost of holding the non-yielding asset. Also in focus was top bullion consumer China’s decision to reopen its borders.

“Industrial demand could be exponential in the short term as large manufacturers come back on line,” said Clifford Bennett, chief economist at ACY Securities. Spot silver gained 1.1% to $24.08, palladium was up 1.2% at $1,826.68, and platinum edged up 0.4% to $1,094.37.