Gold prices dip in Asia with dollar strength prospects in focus

Investing.com - Gold prices eased in Asia on Friday, driven by shifting sentiment on the dollar and the timing for a rate hike as widely expected by the Federal Reserve later this year.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery fell 0.20% to $1,262.30 a troy ounce.

Also on the Comex, silver futures for March delivery eased 0.18% to trade at $17.072 a troy ounce. Elsewhere in metals trading, copper for March slumped 1.33% to trade at $2.544 a pound.

A day earlier, copper hit $2.423, a level not seen since June 2009, before settling at $2.505, down 13.8 cents, or 5.24%, as concerns over the global economic outlook and the impact on future demand prospects dampened the appeal of the commodity.

Overnight, gold held on to gains to trade near a four-month high on Thursday, following the release of a mixed bag of U.S. data and after the Swiss National Bank lowered interest rates further into negative territory.

The U.S. Department of Labor said the number of individuals filing for initial jobless benefits increased by 19,000 last week to 316,000, the highest in almost four months.

Analysts had expected initial jobless claims to decline by 6,000 to 291,000 last week from 297,000 in the preceding week.

At the same time, the Federal Reserve Bank of New York said that its general business conditions index increased to 10.0 this month from a reading of -3.6 in December. Analysts had expected the index to rise to 5.0 in January.

On the index, a reading above 0.0 indicates improving conditions, below indicates worsening conditions.

Separately, the Commerce Department said that producer prices fell by a seasonally adjusted 0.3% last month, compared to forecasts for a 0.4% decline, after falling 0.2% in November.

The core producer price index eased up by a seasonally adjusted 0.3% last month, above expectations for a gain of 0.1% and following a flat reading in November.

Data on Wednesday showed that retail sales in the U.S. dropped by the most in 11 months in December, suggesting that the Federal Reserve could keep rates on hold for longer.

A delay in raising interest rates would be seen as bullish for gold, as it decreases the relative cost of holding on to the metal, which doesn't offer investors any similar guaranteed payout.

Gold rallied sharply after the SNB announced that it would discontinue the minimum exchange rate of 1.20 per euro, while lowering interest rates further into negative territory.

Lower interest rates can give gold a lift, as it decreases the relative cost of holding on to the metal, which doesn't offer investors any similar guaranteed payout.