Gold rose on Monday, extending its recovery from a 10-1/2-month low hit last week, as the US dollar slipped from a 14-year peak against a basket of currencies. Spot gold edged up 0.7 percent to $1,141.61 an ounce by 0651 GMT. The bullion touched $1,122.35 on Thursday, its weakest since Feb. 2. Gold now appears to have found a base, however, upside will be limited as investors look to other markets for yield, ANZ said in a note.
US gold futures gained 0.6 percent to $1,143.60 per ounce on Monday. Gold is likely to rebound to $1,160-$1,180 levels before the year-end, said Mark To, head of research at Hong Kong's Wing Fung Financial Group. The Fed hiked rates for the first time in a year last week and projected three more increases in 2017, up from the two projected in September.
Richmond Fed President Jeffrey Lacker said on Friday the Fed will likely need to raise interest rates more than three times next year and faces challenges in gradually cooling off the US economy. Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.
"Medium- to long-term view (for gold) is not optimistic," said Wing Fung's To. "I won't be surprised if gold prices move down to $1,050 to $1,080 by the start of next year." Spot gold may bounce moderately to $1,153 per ounce as it has found a support at $1,121, according to Wang Tao, Reuters analyst for commodities technicals. Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.63 percent to 836.99 tonnes on Friday. Holdings are down over 11 percent since November.
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