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Gold at session lows as stronger U.S. dollar weighs

Published 09/08/2014, 09:57 AM
Updated 09/08/2014, 09:57 AM
Gold under pressure as stronger U.S. dollar weighs

Gold under pressure as stronger U.S. dollar weighs

Investing.com - Gold futures were lower on Monday, as a broadly stronger U.S. dollar dampened the appeal of the precious metal.

On the Comex division of the New York Mercantile Exchange, gold for December delivery shed 0.39%, or $4.90, to trade at $1,262.40 a troy ounce during U.S. morning hours.

Prices held in a narrow range between $1,262.30 and $1,272.50 an ounce. Futures were likely to find support at $1,258.00, the low from September 5 and resistance at $1,279.20, the high from September 4.

Also on the Comex, silver for December delivery dipped 0.23%, or 4.4 cents, to trade at $19.11 a troy ounce.

The dollar rallied by the most in eight months against the pound to hit a 10-month high after a poll showed the "yes" to Scottish independence campaign on 51% against 49% for the "no" camp.

A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.

Meanwhile, traders continued to reassess their expectations for how quickly the Federal Reserve will roll back its stimulus program following the release of disappointing U.S. employment data.

The Department of Labor said Friday that the U.S. economy added 142,000 jobs in August, the lowest amount in eight months and less than the expected increase of 225,000.

The report also showed that the U.S. unemployment rate ticked down to 6.1% last month from 6.2%, but that was mostly due to more people dropping out of the labor force.

The weaker-than-expected jobs report was taken as a sign that the Federal Reserve will not begin raising interest rates anytime soon.

A recent batch of upbeat data underlined optimism over the health of the economy and fuelled expectations that the Fed will begin to raise rates sooner than previously thought.

While the economy continues to gain steam, Fed Chair Janet Yellen has expressed concern over slackness persistent in the labor market.

In the week ahead, investors will be awaiting Friday’s U.S. data on retail sales and consumer sentiment for further indications on the strength of the economic recovery and the possible future path of monetary policy.

Gold costs money to store and struggles to compete yield-bearing assets when interest rates are on the rise.

Elsewhere in metals trading, copper for December delivery rallied 0.95%, or 3.0 cents, to trade at $3.200 a pound amid speculation weakening economic growth in China will prompt policymakers to introduce fresh stimulus measures.

Official trade data released Monday showed that Chinese exports climbed 9.4% from a year earlier, beating expectations for an 8% increase, however imports declined 2.4% last month, disappointing forecasts for a 1.7% gain.

The country’s trade surplus widened to a record high of $49.8 billion in August from $47.3 billion in July, compared to estimates for a surplus of $40.0 billion.

A slowdown in domestic demand indicated a recovery in the broader economy remains fragile and may need further government stimulus.

China is the world's largest copper consumer, accounting for nearly 40% of global demand.

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