Gold prices have slipped on Monday, snapping three days of gains as the US dollar index strengthened after last week’s soft US jobs data did little to dampen optimism about the world’s largest economy.
That left traders betting the US Federal Reserve would proceed with lifting interest rates this year. Higher rates typically weigh on gold, as they increase the opportunity cost of holding non-yielding assets such as bullion.
‘The dollar in the immediate term is overbought and gold is oversold today. (Gold) needs to recapture $US1,322 to increase,’ said John Caruso, senior commodity strategist at RJO Futures.
Spot gold was down 0.04 per cent at $US1,314.08 an ounce, earlier hitting a one-week high at $US1,318.85. US gold futures for June delivery settled down $US0.60, or 0.05 per cent, at $US1,314.10 per ounce.
The market was thinned by a national holiday in Britain, which closed trading desks in London.
‘The dollar’s strength, driven by a less hawkish European Central Bank and a disparity in bond yields (between the United States and Europe), has kept gold lower today,’ said TD Securities head of commodity strategy Bart Melek.
Investors were therefore tempering bets on higher gold prices, said Commerzbank analyst Carsten Fritsch, with speculators cutting their net long positions on Comex gold contracts to the lowest since July 2017 with a ‘massive reduction’ in the last few trading weeks.
‘Most speculative investors have thrown in the towel already,’ he said.
Government bond yields in the euro area rose in late Monday trading after the European Central Bank’s chief economist, Peter Praet, said an earlier unexpected drop in euro zone core inflation may be a one-off.
Initially dropping, bond yields in the single currency bloc rose after his remarks.
The US dollar index hit a 2018 peak against a commodity basket after US jobs and wages data did little to alter perceptions of strength in the US economy and consequently expectations for more Fed rate hikes.
Meanwhile, silver lost 0.1 per cent to $US16.47 an ounce.