Gold weakens further from 3-1/2-month peak as dollar fights back

NEW YORK/LONDON — Gold edged lower on Monday, retreating further from last week’s three-and-a-half-month high as the US dollar regained some ground against the buoyant euro and traders bet on further US interest rate hikes after Friday’s payrolls data.

The dollar, which has remained weak after its biggest annual drop since 2003, had helped to lift assets priced in the US currency, with gold last week registering a fourth straight weekly gain for the first time since April.

Spot gold was down 0.10% at $ 1,318.84 an ounce by 1: 41 p. m. EST (1841 GMT), while US gold futures for February delivery settled down $1.90, or 0.10%, at $1,320.40 per ounce.

“Gold has been following the dollar pretty heavily. We are watching the dollar relative to US deficits,” said Rob Haworth, senior investment strategist for US Bank Wealth Management.

“Higher deficits, which it looks like tax cuts will do, means a weaker dollar. So there’s room for gold.”

The dollar rose 0.50% against the euro on Monday. After mixed US payrolls data on Friday, traders of US short-term interest rate futures continued to bet that the Federal Reserve will hike US interest rates at least twice in 2018.

Gold is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.

Market participants are awaiting US Consumer Price Index data later this week, which are expected to show inflation likely increased 0.20% in December after rising 0.10% in November.

“Investors think the Fed is stuck on a path of three rate hikes right now. Everyone’s waiting to see what that inflation is,” said Chris Gaffney, president of St. Louis- based EverBank’s world markets division.

Longer term, sentiment for gold is bullish, Mr. Haworth said.

Among other precious metals, silver was down 0.70% at $17.11 an ounce, having hit a one-andahalf- month high of $ 17.29 on Friday.

Platinum was down 0.20% at $971.40 an ounce after touching a more than three-and-half-month peak at $ 973.60 and palladium was 0.90% higher at $ 1,099.60, off last week’s record high of $1,105.70. —