Gold prices edged up slightly on Monday as the US dollar gave up some gains and bargain hunters used dips to accumulate the precious metal.

Spot gold rose 0.3 per cent to $1,253.40 an ounce by 0411 GMT. The yellow metal fell nearly 0.6 per cent on Friday to a low of $1,247.01, its lowest since October 7.

US gold futures were down 0.1 per cent at $1,254.20 an ounce.

“Because the possibility of a December rate hike is increasing, generally, the trend of gold price is downwards but in the short term we think that there could be relatively a mild technical correction,” said Jiang Shu, chief analyst at Shandong Gold Group.

Shu expects prices to touch $1,270 in the short-term before a sharp sell-off on expectations of a rate hike.

“There’s still a period of time before the rate hike.”

Producer prices

US producer prices rose in September to post their biggest year-on-year rise since December 2014, while retail sales gained 0.6 per cent after a 0.2-per cent decline in August.

Positive economic data from the US usually puts pressure on gold prices as investors raise bets on an interest rate hike that would increase the opportunity cost of holding non-yielding bullion.

Fed Chair Janet Yellen gave a broad review of where the US economic recovery may still fall short.

Yellen’s comments

Though not addressing interest rates or immediate policy concerns directly, Yellen laid out the deepening concern at the Fed that US economic potential is slipping and aggressive steps may be needed to rebuild it.

“Though there is not much activity, the metal (gold) is finding good interest in small amounts in China at this price,’’ a trader with a China-based bank said.

Dollar index

The dollar index, which measures the greenback against a basket of currencies, was firm at 98.092 after touching a high of 98.169.

Hedge funds and money managers again reduced their net long positions in COMEX gold and silver contracts in the week to October 11, US Commodity Futures Trading Commission data showed on Friday.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.40 per cent to 965.43 tonnes on Friday.

Silver was up 0.2 per cent at $17.41 a ounce. Platinum rose 0.8 per cent to $939.30. It touched an over 7-month low of $923.50 on Friday.

Palladium was up over 1 per cent at $651, after hitting nearly a three-month low of $629.22 in the previous session.