Gold prices in USD held steady on Monday as financial markets anticipated this week's interest rate decisions and inflation remarks from the Federal Reserve, the European Central Bank, and the Bank of England. Meanwhile, gold prices in China and India, the two largest gold-consuming nations, reached multi-year and all-time highs, respectively, according to Atsuko Whitehouse at Found Gold.

As analysts and traders expect the US Fed to slow, pause, and then reverse its interest rate hikes in 2023, with the Eurozone and UK catching up, the Dollar index—a measure of the US currency's value against its major peers—edged down to near an 8-month low. This resulted in spot gold remaining above $1926 per ounce, down from Thursday's new 9-month highs near $1950 per ounce.

Rhona O'Connell at brokerage StoneX Group Inc. suggests that the increase in gold prices is primarily driven by investors seeking to mitigate risk and anticipating a slowdown or cessation of the Fed's rate cycle.

Gold prices on the Shanghai Gold Exchange began the new Year of the Rabbit unchanged on Monday from pre-Chinese New Year at ¥422 per gram, the highest since September 2020. As China's financial and wholesale bullion markets reopened after the Spring Festival holidays, the price of gold in Shanghai continued to show a strong premium to London, increasing to $13 per ounce today—more than 60% above the typical incentive for new gold imports into the metal's largest consumer market.

In India, the second-largest gold consumer nation, gold prices reached new highs on Monday, surpassing last week's fresh high to hit 57,149 Rupees per 10 grams. The high gold price already prompted dealers to offer discounts of up to $42 an ounce below London quotes last week, inclusive of 15% import and 3% sales levies, compared to a discount of $24 the previous week.

A Mumbai-based dealer with a private bullion importing bank told Reuters that dealers and jewelers have been postponing purchases, hoping the government would reduce import duty in the upcoming budget. India's government budget will be presented on February 1, with dealers and jewelers making their annual plea for New Delhi to slash the gold import duty to undercut smugglers and boost legal demand.

Gold priced in Euros fell 0.4% to €1766 Monday lunchtime as the 19-nation single currency strengthened against the Dollar in FX markets, while the UK gold price in Pounds per ounce edged lower 0.2% to £1554.

Longer-term Eurozone interest rates also climbed after stronger-than-expected inflation data from Spain, the region's fourth-largest economy, caught markets off guard ahead of the European Central Bank's interest rate decision on Thursday. Germany's 10-year government bond yield, the currency union's benchmark rate, rose above 2.31%, the highest in two weeks.

In contrast to Spain's rise to 5.8% year-on-year inflation in January, which exceeded analysts' expectations of 4.7%, inflation on the USA's core personal consumption expenditures measure—the Federal Reserve's preferred gauge, which excludes food and energy costs—slowed to 4.4% year-on-year last month from November's 4.7% reading.

O'Connell at StoneX notes that if bond markets' projections of the Fed's rate decision are too benign given the bankers' rhetoric, the bond markets may come under pressure accordingly. This could take some of the shine off gold but would be unlikely to reverse its price trajectory.

The Fed is almost universally expected to slow its pace of interest rate increases to a 0.25-point rise at its meeting on Tuesday and Wednesday, taking overnight borrowing costs up to 4.75% after four consecutive hikes of 75 basis points and then a 50 bps rise in December. Both the Bank of England and the European Central Bank are forecast to lift their main interest rates by 50 basis points to 4% and 2.5% respectively on Thursday.