Gold prices rose on Monday as the dollar eased, but gains are expected to be muted ahead of inflation data from the United States later this week that could mean US interest rates rise faster than expected. Spot gold was up 0.5 percent at $1,323.16 an ounce by 2:26 pm EST (1926 GMT). It has fallen more than 3 percent since hitting a 17-month peak at $1,366.07 in January. US gold futures settled up 0.8 percent at $1,326.40.
Worries about inflation in the United States surfaced after data this month showed jobs growth surged and wages rose, bolstering expectations that the US labor market would hit full employment this year. US inflation data for January is due on Wednesday and the US Federal Reserve next meets on March 20-21.
"The story is and will be about US monetary policy and dollar direction," Julius Baer analyst Carsten Menke said. "US growth is more solid, wages are rising and the worry is the Fed will be forced into more rate hikes than currently expected." "In the short term, I would expect gold to react more directly to the fortunes of the US dollar, customarily its strongest driver," said Tai Wong, head of base and precious metals trading at BMO Capital Markets in New York.
"COMEX gold saw significant long liquidation according to CFTC data just through last Tuesday and gold bulls are reinstating long positions as markets have apparently normalized." Silver gained 1.2 percent to $16.55 an ounce, platinum added 0.7 percent to $971.50 an ounce and palladium was up 1.1 percent at $986.97 an ounce.