Gold steadied on Monday but remained close to its lowest level in nearly six years as the dollar hit a multi-month high and was on track for its steepest monthly slide in 2-1/2 years on prospects of a US interest rate rise this year. Spot gold was up 0.4 percent at $1,061.91 an ounce by 1434 GMT, just above Friday's trough at $1,052.46, the lowest since February 2010.
The dollar was at an eight-month high against a basket of major currencies, making gold more expensive for holders of other currencies. Bullion has lost 7 percent of its value in November, its biggest monthly fall since June 2013, as investors remained focused on a possibly imminent rate hike in the United States. Gold, a non-interest-paying asset, could take a hit from higher rates as the dollar gains and the opportunity cost of holding the precious metal increases.
The US Federal Reserve holds its next policy meeting on December 15-16. "Gold's negative correlation with the dollar is likely to continue because of the expectations of the US interest rates," ETF Securities Martin Arnold said. "We expect the dollar to peak early next year and then decline as the market gets on board with the pace of the Fed tightening cycle."
A US payrolls report on Friday will be even more closely watched than usual. A strong number, after a surge in job growth in October, could cement expectations that the Fed will deliver its first hike in almost a decade. "A number close to the 200,000 mark will be sufficient to confirm in the Fed's mind that the time is right to act," ICBC Standard Bank analyst Tom Kendall said. The European Central Bank policy meeting on Thursday will also be eyed for impact on the currency markets. The ECB is widely expected to ease policy.
"I thought there was a possibility that the euro had already anticipated everything that was going to be delivered by Draghi this week but it seems not," Kendall said. "Gold keeps being under pressure in the absence of anything else supportive." Investors are pulling money out of bullion funds, exacerbating the sell-off in gold. Assets in SPDR Gold Trust, the world's top gold-backed exchange-traded fund, fell to their lowest since September 2008 on Friday. Silver rose 0.4 percent to $14.10 but was set for a 10 percent monthly loss. Palladium has lost 20 percent for the month and was down 1.1 percent at $541.75 an ounce. Platinum has lost 16 percent in November and fell to a seven-year low of $820.60 on Monday.