Gold edges lower as July rate hikes loom; silver near lowest level in 2 yrs

Gold is currently ranging above $1,800 backed by Treasury yields and the spike in US dollar strength

Gold prices fell on Monday, hovering near the key $1,800 level, as the prospect of higher global interest rates amid rising price pressure and a firmer dollar weighed on bullion's appeal.

Spot gold fell 0.2% to $1,806.60 per ounce by 0916 GMT after touching a five-month low of $1,783.50 on Friday.

U.S. gold futures rose 0.3% to $1,807.50.

The U.S. dollar held close to a two-decade high touched last month, pressuring gold by making it expensive for those holding other currencies.

"Gold bulls are stuck in a quagmire of aggressive Fed policy actions, as the prospects of higher U.S. rates erode support for the precious metal," said Han Tan, chief market analyst at Exinity.

The U.S. Federal Reserve is expected to deliver another 75-basis-point (bps) interest rate hike this month.

The European Central Bank too is widely predicted to follow its global peers. Euro zone inflation hit yet another record high in June as price pressures broadened.

"Markets have yet to fully price in a 75 bps hike at this month's FOMC meeting. If policymakers are forced to turn more aggressive in the face of unwavering inflation, that could spell another leg down for gold prices," Tan added.

Investors are also awaiting publication of minutes from last month's Fed meeting on Wednesday and U.S. employment data on Friday.

"In this environment of ever rising interest rates, it is hard to see gold making significant gains but if the precious metal can hold above $1,800 an ounce, then it would demonstrate that there remains significant underlying support for gold," Rupert Rowling, market analyst at Kinesis Money, said.

Spot silver fell 0.1% to $19.86 per ounce, trading near its lowest in two years.

Platinum slipped 0.8% to $882.25, while palladium was little changed at $1,960.29. U.S. markets are closed for the Independence Day holiday.