Gold turns lower as short-covering rally fades

Investing.com - Gold prices reversed earlier gains to trade mildly lower on Monday, as a short-covering rally which boosted futures to a two-week high earlier in the session lost momentum.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery rose by as much as 0.7% earlier to hit a daily high of $1,193.60 a troy ounce, the most since October 29.

Prices last traded at $1,184.90 an ounce during U.S. morning hours, down 10 cents, or 0.01%.

Comex gold rallied $24.10, or 2.07%, on Friday to settle at $1,185.60 an ounce.

Futures were likely to find support at $1,146.00, the low from November 14, and resistance at $1,202.40, the high from October 31.

In a report, the Federal Reserve Bank of New York said that its manufacturing index increased to 10.2 this month from a reading of 6.2 in October. Analysts had expected the index to rise to 11.1 in November.

A separate report showed that U.S. industrial production fell 0.1% last month, disappointing expectations for a gain of 0.3%. September's figure was revised to a 0.8% gain from a previously reported 1.0% increase.

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.

Also on the Comex, silver futures for December delivery shed 21.6 cents, or 1.32%, to trade at $16.09 a troy ounce. Prices soared 69.3 cents, or 4.44%, on Friday to settle at $16.31 an ounce.

Elsewhere in metals trading, copper for December delivery declined 1.3 cents, or 0.44%, to trade at $3.033 a pound, as concerns over the global economic outlook were amplified after data showed that Japan unexpectedly slipped into recession.

Japan’s economy contracted by an annualized 1.6% in the third quarter, following a 7.3% decline in the previous quarter. Economists had forecast a 2.3% increase.

Copper is sensitive to the economic growth outlook because of its widespread uses across industries.