LONDON: Gold held close to its lowest in two months on Monday, as the dollar marched higher after central bank heads signalled that interest rates were set on a diverging course in the United States, Europe and Japan.
At a gathering of central bankers in Jackson Hole, Federal Reserve chair Janet Yellen nodded to the concerns of some Fed officials about the sustained level of monetary policy stimulus, even as she stressed the need to move cautiously on raising rates.
The heads of the European Central Bank and Bank of Japan pledged more policy stimulus, which weighed on the euro and the yen versus the U.S. currency.
Gold was down 0.2 percent to $1,276.94 by 0950 GMT. The metal fell 1.8 percent last week, its biggest weekly fall in a month, hurt by strong U.S. economic data and speculation of an early interest rate hike, which sent the metal to its lowest in two months at $1,273.06 on Thursday.
U.S. gold futures lost $2.40 to $1,277.70 an ounce. Electronic trading was halted for four hours on Monday due to a technical glitch.
The dollar was up 0.3 percent against a basket of major currencies, aided by steadier yields on Treasury notes, making gold more expensive for other currency holders.
The metal, however, held above charts support around $1,270, traders said, as liquidity was drained by the absence of UK players on a Bank Holiday weekend.
"Gold is holding well above support at $1,271 considering the perfect storm of negative gold news last week when we had rising stocks, rising bond yields, strong economic data from the U.S. and a firmer dollar," Saxo bank senior manager Ole Hansen said.
"Even though the Fed interest rates tightening is receiving most of the attention, there is a lack of commitment because of poor liquidity at the moment."
The Fed has said it would wait a "considerable time" after winding down a stimulative bond-buying programme in October before raising rates. Financial markets currently expect a rate hike around the middle of next year.
Higher interest rates would hurt the attractiveness of non-interest-bearing assets such as gold.
Investment demand for gold was also hampered by stronger European equities after ECB President Mario Draghi raised expectations of further policy easing.
The previous week's fall in bullion attracted buying from jewellers in Asia, but the amount was limited and investors stayed on the sidelines, traders said.
"There's a bit of buying interest here too, but some people are also waiting for more weakness in prices," said a dealer in Singapore.
Premiums for gold bars in Hong Kong stood at 70 cents to $1.10 to the spot London prices, higher than 50 to $1.00 quoted late last week because of purchases from jewellers.
In Singapore, premiums were steady at 80 cents to $1 an ounce to spot London prices.
July net gold flows into China from Hong Kong dropped to 22.107 tonnes versus 40.543 tonnes in June, their lowest for three years, due to ample supply and as jewellers waited for bargains, data showed on Monday.
Silver was down 0.3 percent at $19.34 an ounce, not far from a two-month low of $19.25 hit on Thursday.
Spot platinum fell 0.2 percent to $1,413.75 an ounce, having touched its lowest since May 5 at $1,407.30 last week. Spot palladium dropped 0.3 percent to $880.60 an ounce.
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