Gold retreats from 7-week top as dollar bounces back

[LONDON] Gold edged lower on Tuesday as the dollar recovered and European shares rose, but uncertainty about the timing of a US interest rate increase kept bullion not far from a seven-week high above US$1,200 an ounce.

Bullion rose to its highest since Feb 17 at US$1,224.10 on Monday, supported by a weakening dollar after US non-farm payrolls data fuelled expectations that the Federal Reserve could delay an anticipated rate increase this year.

US jobs posted the slowest growth in more than a year in March.

Spot gold was down 0.2 per cent at US$1,211.90 an ounce by 1146 GMT, while US gold for June delivery slipped 0.6 per cent to US$1,211.70 an ounce.

The dollar rose 0.6 per cent versus a basket of major currencies, aided by higher Treasury yields, while European shares also climbed, denting gold's appeal as an insurance against risk.

A stronger greenback makes dollar-denominated bullion more expensive for holders of other currencies, while returns on US bonds are closely watched by the gold market, given that the metal pays no interest.

Gold is likely to continue to depend on movements in the dollar and expectations of higher US interest rates, ActivTrades chief analyst Carlo Alberto de Casa said.

"The next support levels are at US$1,192 and then US$1,182."

New York Fed President William Dudley said the timing of the US rate rise, which would be the first in nearly a decade, is unclear and policymakers must watch that the US economy's surprising recent weakness does not signal a more substantial slowdown.

Growth in US services sector slowed in March to its lowest level in three months, but the index of new export orders rose to the highest level in more than two years.

But Asian physical demand remains tepid at current levels.

The premium for physical gold on the Shanghai Gold Exchange was less than a dollar an ounce over the global spot benchmark on Tuesday, down from around US$2-US$3 last week as Chinese buyers returned from a long holiday weekend.

"The gold price right now for a Chinese consumer is not cheap, it needs to be cheaper," said Victor Thianpiriya, analyst at Australia and New Zealand Bank.

Spot silver fell 0.7 per cent to US$16.85 an ounce, while platinum lost 0.6 per cent to US$1,166.50 an ounce and palladium was up 0.3 per cent to US$769.25 an ounce.

REUTERS