Gold holds near US$1,200 as investors weigh dollar, rates outlook

[MELBOURNE] Gold held near US$1,200 an ounce as investors weighed the outlook for the dollar amid signs Federal Reserve officials remain split over the timing of the first increase in borrowing costs since 2006.

Bullion for immediate delivery traded at US$1,200.80 an ounce at 9:38 am in Singapore from US$1,198.88 on Monday, when the metal dropped 0.7 per cent, according to Bloomberg generic pricing. Gold in Shanghai fell for the first time in three days.

The Bloomberg Dollar Spot Index was 0.1 per cent lower after climbing to a three-week high on Monday. Investors are assessing economic data to determine when the Fed is likely to boost borrowing costs. The US is set to report retail sales on Tuesday after data this month showed payrolls rose in March at the slowest pace in more than a year while jobless claims over the past month were the lowest in 15 years.

"It will be dependent on what the US dollar does," said David Lennox, a resource analyst at Fat Prophets in Sydney. "We'll see volatility probably around the US$1,200 to US$1,150 region. That's probably going to go on for a while."

The Federal Open Market Committee was split at its meeting last month on when to begin raising rates from near zero. Several participants wanted to normalize policy starting in June, while others favoured later in the year, minutes of the March 17-18 gathering show. Higher rates hurt gold's appeal as the metal generally offers returns only through price gains.

Gold may be supported after US equities declined, James Steel, an analyst at HSBC Securities (USA) wrote in a note. Bullion often competes with equities for investor capital. The Standard & Poor's 500 Index fell 0.5 per cent on Monday.

Gold for June delivery was little changed at US$1,200.40 an ounce on the Comex. Bullion of 99.99 percent purity fell 0.4 percent to 240.40 yuan a gram ($1,203.04 an ounce) on the Shanghai Gold Exchange.

Silver for immediate delivery rose 0.3 per cent to US$16.3281 an ounce. Platinum added 0.3 per cent to US$1,157.38 an ounce, while palladium was little changed at US$771.13 an ounce.

BLOOMBERG