Gold retreated early on Monday as the dollar rose versus the euro, but the metal held around a nine-week high as pressure on stock markets continued to support investors' flight to safety. Asian shares sank to their lowest in more than four years on Monday after the People's Bank of China guided the yuan's midpoint rate sharply stronger. Global stock indexes and oil prices also dropped, continuing a brutal start to 2016.
"Some investors were anticipating that gold futures were slightly overbought after the run-up last week," said Phillip Streible, senior commodities broker for RJO Futures in Chicago. "Traders booked profits on that run-up to $1,100, possibly to free up margins to support other positions that have recently been beat up but still have long-term prospects."
Spot gold was down 0.7 percent at $1,095.76 an ounce at 3:03 pm EST (2003 GMT), while US gold futures for February delivery settled down 0.2 percent at $1,096.20. "There is a bit of short rally now, it seems that gold has encountered resistance at the 100-day moving average, which comes in at $1,109," Mitsubishi Corp strategist Jonathan Butler said. Bullion is often seen as an alternative investment during times of financial uncertainty, although safe-haven rallies tend to be short-lived.
Perceived missteps by China's authorities in controlling their share market and currency have led to concerns Beijing might lose its grip on economic policy. China is the world's biggest consumer of gold at around 1,000 tonnes a year. Gold slid 10 percent last year on fears higher US rates would lower demand for the non-interest-paying asset, while boosting the dollar. The Fed eventually raised rates in December and attention has shifted to how many hikes will follow in 2016.
Meanwhile, holdings of the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, rose 0.69 percent on Friday, data from the fund showed. Palladium fell to its lowest since August 2010 at $477.22 an ounce, while platinum was down 4.2 percent at $838.71 an ounce. Silver dropped 0.5 percent at $13.86 an ounce.
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