Gold edges down as firmer US dollar, Fed rate hike concerns weigh

[BENGALURU] Gold prices on Monday held near a one-week low hit in the previous session, as the US dollar firmed after largely upbeat US economic data reinforced the prospects of another rate hike by the Federal Reserve next month.

Spot gold was down 0.1 per cent at US$1,268.61 per ounce as of 0740 GMT. On Friday, the precious metal touched a one-week low of US$1,265.16.

US gold futures for December delivery were nearly unchanged at US$1,269.

The dollar index, which measures the greenback against a basket of six major currencies, last stood at 94.990, trading within sight of an Oct 27 peak at 95.150, a more than three-month high.

"The strengthening of the US dollar due to strong US data has kept gold prices in check. The movement has been quite consistent trading within US$1,275 an ounce range," said Brian Lan, managing director at dealer GoldSilver Central in Singapore.

The US dollar touched its highest level in nearly eight months against the yen.

Markets are increasingly confident the Fed will hike interest rates in December, which has weighed on the precious metals complex, said Jordan Eliseo, chief economist at gold trader ABC Bullion.

US jobs growth accelerated in October, although wage growth was tepid, adding to the Fed's assessment last week that"the labor market has continued to strengthen", with the sluggish wage data doing little to change expectations.

Traders see a 90.2 per cent chance of a rate hike at the central bank's next meeting, according to Thomson Reuters data.

Higher interest rates tend to boost the US dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.

Analysts said the yellow metal could find support after US President Donald Trump, who kicked off a 12-day Asia trip, looked to present a united front with Japan against North Korea.

Meanwhile, holdings in SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, fell 0.03 per cent to 845.75 tonnes on Friday.

Hedge funds and money managers reduced their net long position in COMEX gold contracts for the seventh straight week, in the week to Oct 31, US Commodity Futures Trading Commission (CFTC) data showed on Friday.

Among other precious metals, spot silver inched 0.4 per cent higher to US$16.86 an ounce, platinum was flat at US$918.50, while palladium was up 0.2 per cent at US$998.50.

REUTERS