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Gold eases from 5-month peak as dollar firms

(Reuters) - Gold edged lower on Monday as the dollar firmed, but stock market volatility and prospects of a slower pace of U.S. interest rate hikes in 2019 kept bullion close to a 5-month peak scaled earlier in the session.

Goldsmiths arrange products in a gold and jewellery store in Istanbul, Turkey, June 14, 2018. REUTERS/Huseyin Aldemir

Spot gold XAU= was down 0.3 percent at $1,244.22 per ounce at 12:34 p.m. EST (1734 GMT), having touched $1,250.55, its highest since July 11. U.S. gold futures GCcv1 were 0.2 percent lower at $1,249.70 per ounce.

“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 dollar as British Prime Minister Theresa May postponed a parliamentary vote on her Brexit deal.

The dollar rebounded after posting its biggest weekly drop in more than three months last week as weak U.S. data reduced expectations of more U.S. interest rate increases. [USD/]

The U.S. 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 dollar, in which it is priced.

Meanwhile, losses on global stocks snowballed on Monday as fresh signs emerged that the U.S.-China trade spat was taking a deeper toll on world economic growth. [MKTS/GLOB] [.N]

“It’s really encouraging that gold has risen to the $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 percent last week, its best performance since the week of March 23 and has recovered about 8 percent from a 19-month low of $1,159.96 in mid-August.

“With gold prices trading above the $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 U.S. growth that could continue to weigh on the dollar, should see the yellow metal supported.”

Reflecting investor interest in bullion, holdings in SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, rose 0.20 percent to 759.73 tonnes on Friday. [GOL/ETF]

Among other precious metals, spot silver XAG= slipped 0.4 percent to $14.55 per ounce, while palladium XPD= dipped 1.2 percent to $1,208.90.

Platinum XPT= fell 1.1 percent to $781 per ounce. The metal slipped to $775 earlier, its lowest since Sept. 10.

Reporting by Swati Verma in Bengaluru; Editing by Jeffrey Benkoe and Susan Thomas