Gold falls to one-month low on stronger US dollar

[BENGALURU] Gold slid to its lowest level in a month on Monday as the dollar rose to 16-month highs, boosted by the Federal Reserve's hawkish interest rate policy and political uncertainty in Europe.

Spot gold fell 0.5 per cent to US$1,202.80 per ounce at 12.54pm EST (1754 GMT), having touched a one-month low of US$1,201.91 earlier in the session.

US gold futures edged 0.4 per cent lower to US$1,203.7 per ounce.

Last week, the metal posted its biggest weekly decline since August after the Fed reaffirmed its monetary tightening stance, seen as a negative for non-yielding bullion.

"Of the hawkish message we got from the Fed last week, we are now seeing the aftermath," said Bart Melek, head of commodity strategies at TD Securities.

"We are now right below the 50-day (moving average) at US$1,210. Trading range right now is US$1,180 to US$1,240 and we are going to need a catalyst to get us moving higher up."

The Fed last week indicated it planned to raise rates next month and remained on track for two more potential hikes by mid-2019 on the back of an upbeat economy and rising wage pressures, lifting the dollar.

The dollar index, which measures the greenback against a basket of six major currencies, rose to its highest since June 2017, denting gold's appeal by making it more expensive for holders of other currencies to buy the metal.

Gold prices have fallen about 12 per cent since a peak in April after investors preferred the dollar as the US-China trade war unfolded against a background of higher US interest rates.

In Britain, doubts that the government will be able to secure a Brexit agreement, as well as Rome facing a Tuesday deadline to submit a revised Italian budget to the European Union, also supported the dollar.

"The main driver (for gold) has been some renewed dollar strengthening... due to political uncertainty in UK and Italy," said Saxo Bank analyst Ole Hansen, adding that US$1,200 is "both the psychological and technical level of support" for the metal.

Silver fell 1.2 per cent to US$13.98 per ounce, touching its lowest since Sept 11.

Palladium dipped 1.4 per cent to US$1,103.30 per ounce, while platinum rose 0.5 per cent at US$845 an ounce.

REUTERS