Gold prices held in a tight range on Monday as market participants continue to focus on the U.S. Federal Reserve’s interest rate strategy in their fight against surging inflation.

Spot gold was little changed at $1,984.05 an ounce at 1144 GMT while U.S. gold futures were up 0.2% at $1,994.40.

Gold prices are struggling for direction as investors remain on the sidelines, said FXTM senior analyst Lukman Otunuga.

“The prospect of further U.S. rate hikes has limited upside gains while geopolitical risks and recession fears continue to support gold bulls,” Otunuga said.

Gold retreats to weekly loss on hawkish Fed

Markets put the chances of the U.S. central bank raising rates by 25 basis points at 90%, according to the CME FedWatch tool. The U.S. Federal Reserve’s next policy meeting is over May 2-3.

Yeap Jun Rong, a market analyst at IG, noted that “resilience in economic conditions over the coming weeks could brew speculations for another rate hike in June or push back against the timeline of rate cuts”, which would weigh on gold prices.

Higher interest rates raise the opportunity cost of holding non-yielding gold.

Bullion prices dipped below the $2,000 mark last week on hawkish remarks from Fed officials and after the release of surveys showing that U.S. and euro zone business activity gathered pace in April.

Data last week showed COMEX gold speculators their cut net long position by 3,311 contracts to 134,253 in the week to April 18.

Saxo Bank strategist Ole Hansen said that the gold market would need an even bigger correction to trigger any forced long liquidation, which remains a relatively small risk because long gold holds above support between $1,955 and $1,960.

Spot silver was flat at $25.04 an ounce.

China is planning to accelerate industrial-scale solar installations, which could boost photovoltaic silver demand, Heraeus analysts said in a note.

Platinum shed 1.6% to $1,106.36 and palladium was down 1% at $1,586.57.