Gold prices rose more than 1 percent on Monday, recovering from their lowest levels since February as the dollar and long-dated US Treasury bond yields retreated from recent highs. Spot gold was up 0.8 percent at $1,192.64 an ounce by 2:44 p.m. ET (1944 GMT), after climbing as high as $1,197.54 earlier in the session. Prices remained within sight of Friday's 9-1/2-month low of $1,171.21.
US gold futures settled up 1.05 percent at $1,190.80 per ounce. The metal has fallen nearly 7 percent so far this month, as the dollar and bond yields benefited from heightened expectations of enlarged fiscal spending by US President-elect Donald Trump. As gold pays no interest, the rise in returns from US bonds and other markets is seen as negative for the metal.
"If oil prices collapse or stay low then inflation won't pick up as much and there would be less of an incentive to raise US rates rapidly and the dollar would not be as strong, which would be supportive for gold," ING head of commodity strategy Hamza Khan said. The dollar was down 0.2 percent against a basket of six major currencies, while the yield on 10-year US Treasuries retreated from last week's 16-month high.
"The interest rate hike has been priced into gold but you could expect further volatility leading up to the rate hike," said Maxwell Gold, director of investment strategy at ETF Securities, noting that the US Federal Reserve is widely expected to raise US interest rates at its mid-December meeting. Traders also said a directive from the People's Bank of China to limit gold imports was creating concerns about supply in the top consumer of the metal and kept premiums in Shanghai around $22. Gold premiums in China jumped to the highest in nearly three years last week on supply worries.
Demand from South East Asia is also quite good and buying at lower prices could have driven prices higher, said Cameron Alexander, an analyst with Thomson Reuters GFMS metals consultancy.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.73 percent to 885.04 tonnes on Friday. "As long as we continue to see this quite heavy selling in the ETFs market and strength in the dollar, gold could come under further pressure," Saxo Bank senior manager Ole Hansen said. Silver rose 0.5 percent at $16.58 an ounce, palladium climbed 1.9 percent to $754.75 and platinum was up 1.9 percent at $920.
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