Investing.com -- Gold prices soared on Monday erasing all of its losses from a precipitous fall last week, as precious metal traders awaited indications from the Federal Reserve on the timing of an interest rate hike later this week.
Gold futures for June delivery on the Comex division of the New York Mercantile exchange surged $31.10 or 2.65% to reach a daily-high of $1,206.10 an ounce in U.S. afternoon trading, before falling slightly back to settle at $1,205.00. Gold prices dropped slightly to a session-low of $1,177.60 in overnight trading, before skyrocketing in U.S. morning trading hours.
On Friday, gold futures plunged to a session-low of $1,174.10, its lowest level since late-March, before inching up at the close. Last week, gold dropped by 2.34% or nearly $30 an ounce to post its second straight weekly loss.
Gold likely gained support at $1,185.30, its low from March 30 and met resistance at $1,218.60, its high from April 6.
The Fed is expected to keep its benchmark Federal Funds Rate at its current level of zero to 0.25% following the conclusion of the two-day Federal Open Market Committee (FOMC) meeting on Wednesday. When the Fed released the minutes from its March meeting earlier this month, the committee ruled that an increase in the target range for the rate remained "unlikely at the April meeting."
The FOMC appears uncertain on the timing of its first interest rate hike since 2009, amid a possible growing divide between Fed governors on a date for lift-off.
Gold, which is unattached to interest rates or dividends, struggles to compete against high yield bearing assets in high interest rate environments. A strong jobs report for the month of February sent gold plummeting to $1,165 levels, while dovish comments from Fed chair Janet Yellen in mid-March fueled speculation of a delayed hike spurring a rally.
The Fed is taking a data-driven approach to its first interest rate hike since it began an ambitious quantitative easing program following the Financial Crisis. A rash of soft economic data, however, in recent weeks has caused the U.S. central bank to take a cautious approach to policy normalization. Last week, new claims for jobless benefits rose to 295,000 nationwide, ticking upward for the third consecutive week. While the U.S. unemployment rate remained steady in March at 5.5%, payroll jobs increased by only 126,000, following substantial gains of more than 200,000 the previous two months.
Although the Fed has not ruled out lift-off in June, analysts increasingly believe that a rate hike will not occur until the fall. The CME Group (NASDAQ:CME), for instance, isn't pricing a rate hike in its models until October.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell slightly by 0.33% to 96.75.
Gold becomes more expensive for foreign purchasers as the dollar appreciates.
Elsewhere, silver for July delivery surged 0.793 or 5.06% to 16.473 an ounce.
Copper for July delivery gained 0.023 or 0.85% to 2.776 a pound.