Gold bounces off 5-1/2-month low on physical buying

[BENGALURU] Gold crawled higher in Asian trade on Monday, snapping a three-session losing streak, helped by physical buying after the metal slid to a 5-1/2-month low on Friday.

Spot gold was up 0.3 per cent at US$1,211.72 an ounce by 0240 GMT. In the previous session, the metal fell as much as one per cent to mark its lowest since May 30 at US$1,203.52.

US gold futures were up 0.2 per cent at US$1,211.50 per ounce.

"The low prices have induced some interest in the physical market," said ANZ analyst Daniel Hynes.

"However, the dollar has got some momentum behind it and until a turnaround, it is going to be difficult for gold prices to recover."

The US dollar index, which measures the greenback against a basket of major currencies, was steady at 101.200 after climbing to its highest level since 2003 on Friday on continued bets of faster inflation and higher interest rates.

"There are chances for prices to weaken below US$1,200 in the next few weeks leading into the Federal Open Market Committee (FOMC) meeting," Mr Hynes added.

Bullion has also been pressured by talk of an interest rate hike in December by the Federal Reserve.

Markets now put a 90 per cent chance on the Fed hiking rates by 25 basis points on Dec 14.

New York Fed President William Dudley said on Friday the post-US election market reaction is not concerning in terms of planned interest rate increases.

This came after Fed Chair Janet Yellen said the election of Donald Trump as US president has done nothing to change the Federal Reserve's plans for a rate increase "relatively soon".

Gold is highly sensitive to interest rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the US dollar, in which it is priced.

"We expect gold to continue to struggle against a backdrop of a firmer US stock market, a stronger dollar and rising global rates," Edward Meir, analyst with INTL FCStone, said in a note.

Spot gold seems to have found a support at US$1,204 per ounce, it may hover above this level for one day or bounce moderately into a range of US$1,222-US$1,235, according to Reuters technicals analyst Wang Tao.

Speculators cut their net long position in Comex gold for the first time in four weeks, in the week to Nov 15, and also reduced it in silver, US Commodity Futures Trading Commission data showed on Friday.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.58 per cent to 915.29 tonnes on Friday from 920.63 tonnes on Thursday.

Silver was up 0.53 per cent at US$16.67 per ounce.

Platinum was little changed at US$921.00 and palladium fell 0.3 per cent to US$722.22 an ounce.

REUTERS