Gold was stuck near its lowest in over three months on Monday, pressured by a stronger dollar ahead of a key Federal Reserve policy meet this week that could hint at the timing of any hike in US interest rates.
Spot gold was little changed at $1,159.20 an ounce by 0334 GMT. It had posted its sixth weekly decline in seven on Friday.
The metal hit its lowest since December 1 last week at $1,147.10, after strong US jobs data stoked speculation that the Fed would increase rates in June.
Fed interest rate hike
Investors will be watching the Fed’s two-day policy meet that begins on Tuesday for clues on how soon it could raise interest rates. Higher rates could dent the demand for gold, which does not pay any interest.
“A huge decline (in gold prices) could once again be expected should the FOMC conference throw up hawkish surprises,’’ said Phillip Futures analyst Howie Lee, referring to the Fed’s Federal Open Market Committee.
“The usual rhetoric of an improving US economy and lessened slack in the labour market will undoubtedly add strength to the bears,’’ he said.
Even just the removal of the term “patient’’ regarding higher rates could send prices to as low as $1,125, Lee said.
After successive months of strong jobs data, expectations have been growing that the Fed will signal a June rate rise by dropping a pledge to be “patient’’ in considering such a move.
Dollar vs other currencies
The dollar has already been boosted by prospects of higher rates, trading near a 12-year high against a basket of major currencies.
A stronger greenback hurts gold’s safe-haven appeal, while also making it more expensive for the holders of other currencies. Investor sentiment towards gold has been bearish.
Holdings in SPDR Gold Trust
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.28 tonnes to 750.67 tonnes on Friday — the lowest since late January.
Hedge funds and money managers reduced their bullish stance in Comex gold and silver for the sixth straight week in the week ended March 10, US Commodity Futures Trading Commission data had showed on Friday.
In the physical markets, lower gold prices attracted some bargain hunters, but not in sufficient numbers to boost prices, said traders. In the second biggest consumer, China, premiums on the Shanghai Gold Exchange were about $5-$6 an ounce above the global benchmark, stronger than Friday’s premiums.