Investing.com - Gold prices edged lower on Monday, as demand for the U.S. dollar continued to be underpinned by the diverging monetary policy stance between the Federal Reserve and central banks in Asia and Europe.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery lost $3.70, or 0.31%, to trade at $1,194.70 a troy ounce during European morning hours.
On Friday, Comex gold prices rose to a session high of $1,207.60 a troy ounce, the most since October 30, before settling at $1,197.70 by close of trade, up $6.80, or 0.57%.
Futures were likely to find support at $1,173.90, the low from November 19, and resistance at $1,216.50, the high from October 30.
The People's Bank of China cut its benchmark one-year deposit rate by 25 basis points to 2.75% on Friday and trimmed its one-year lending rate by 40 basis points to 5.6%.
The move came in response to recent signs of a slowdown in the world’s second-largest economy.
Meanwhile, in Europe, European Central Bank President Mario Draghi reiterated on Friday that the central bank is ready to expand its stimulus program to raise inflation as quickly as possible.
The ECB's current stimulus program includes purchases of asset-backed securities and covered bonds, though markets are keeping a close eye out for plans to announce purchases of government debt, a stimulus tool known as quantitative easing.
The US dollar index, which tracks the greenback against a basket of six major rivals, rose 0.15% to hit a fresh four-year high of 88.52.
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.
Gold prices are likely to remain vulnerable in the near-term amid indications a strengthening U.S. economic recovery will force the Federal Reserve to start raising interest rates sooner and faster than previously thought.
Expectations of higher borrowing rates going forward is considered bearish for gold, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise.
In the week ahead, the U.S. is to release a string of economic reports on Wednesday due to Thursday’s Thanksgiving holiday, including a look at unemployment claims and durable goods orders.
Also on the Comex, silver futures for March delivery slumped 9.9 cents, or 0.6%, to trade at $16.36 a troy ounce.
Elsewhere in metals trading, copper for March delivery declined 0.4 cents, or 0.15%, to trade at $3.025 a pound, as traders weighed whether a surprise rate cut in China would translate into an increase in demand for the industrial metal.
The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.