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Gold eases from five-month peak as US dollar firms on Brexit worries

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Gold edged lower on Monday as the US dollar firmed against the pound on doubts about Britain's departure from the European Union, but falling equities and prospects of a slower pace of US interest rate hikes in 2019 kept bullion near a five-month peak.

[BENGALURU] Gold edged lower on Monday as the US dollar firmed against the pound on doubts about Britain's departure from the European Union, but falling equities and prospects of a slower pace of US interest rate hikes in 2019 kept bullion near a five-month peak.

Spot gold was down 0.4 per cent at US$1,242.89 per ounce at 1.47pm EST (1847 GMT), having touched US$1,250.55, its highest level since July 11, early in the session. US gold futures settled down US$3.20, or 0.3 per cent, at US$1,249.40.

"With the vote on Brexit being pulled, there is a rise in the dollar which is keeping pressure on gold at the moment," said Bob Haberkorn, senior market strategist at RJO Futures.

The pound slid to its weakest level in nearly 1-1/2 years against the US dollar as British Prime Minister Theresa May postponed a parliamentary vote on her Brexit deal.

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The US dollar rebounded after posting its biggest weekly drop in more than three months last week on Brexit worries and as weak US data reduced expectations of more US interest rate increases.

The US Federal Reserve is widely expected to raise rates at its Dec 18-19 meeting, but the focus will be on how many hikes will follow in 2019.

Gold tends to gain when rate hike expectations recede as lower rates reduce the opportunity cost of holding non-yielding bullion and weigh on the US dollar, in which it is priced.

Meanwhile, losses on global stocks snowballed on Monday as fresh signs emerged that the US-China trade dispute was taking a deeper toll on world economic growth.

"It's really encouraging that gold has risen to the US$1,250 level at the same time when equities were soft and this really underpins gold's role as a safe haven," said Julius Baer analyst Carsten Menke.

Gold rose more than 2 per cent last week, its best performance since the week of March 23 and has recovered about 8 per cent from a 19-month low of US$1,159.96 in mid-August.

"With gold prices trading above the US$1,240 per ounce resistance, we think that this breakout could have staying power," analysts at TD Securities wrote in a note.

"A change in tone by the Fed, combined with continued deterioration in sentiment with regards to US growth that could continue to weigh on the dollar, should see the yellow metal supported."

Reflecting investor interest in the bullion, holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.2 per cent to 759.73 tonnes on Friday.

Among other precious metals, spot silver fell 0.8 per cent to US$14.50 per ounce, while palladium dipped 0.9 per cent to US$1,213.50.

Platinum fell 1.2 per cent to US$780.40 per ounce. The metal slipped to US$775 earlier, its lowest price since Sept 10.

REUTERS