Gold Hits 3-Week High

Gold rose to the highest level in almost three weeks on Monday, resuming the upside move that started five days as equities went soft after some lackluster data from China.

The bullion market kicked off the weekly trade on higher note, albeit the strength of the US dollar and the heavy Fedspeak, which was led by comments from outgoing chair Ben Bernanke who said the economy, has made important progress and that. Despite the beginning of tapering, the Federal Reserve remains committed to accommodative policy.

Spot gold was up 0.23% at $1,240.59 an ounce, compared with Friday`s close at $1,237.72. The day`s range is between $1,233.15 and $1,238.04.

A stronger dollar also weighed on the metal against the backdrop of early reduction in the Fed’s stimulus program, which gave the advantage to global equity markets to rally in return. However, a fresh selloff in equity markets prompted investors to seek the metal for safety in the wake of downbeat data from the world`s second-largest economy, China.

Earlier today, Asian shares dropped to the lowest in two weeks after growth in China`s services sector stalled unexpectedly last month. On the other hand, the dollar held grounds off four-week high, inspired by a bright US economic outlook.

The Fed will release minutes from its Dec 17-18 meeting of the Federal Open Market Committee (FOMC), which debuted the decision to start tapering the central bank’s monthly asset purchases to $75 billion. The minutes are due Wednesday 02:00 p.m. and will be watch closely for signals over how far the FOMC could further reduce its asset purchases.

The Fed will buy $40 billion in Treasuries in January, down from $45 billion in December, and $35 billion in mortgage-back securities.

Next week will also feature policy decisions from the European Central Bank (ECB) and the Bank of England (BOE).

Unlike the ISM report on manufacturing, the ISM report on non-manufacturing has been signaling a slowing in US growth. Watch especially for the non-manufacturing employment index as an indication for Friday`s jobs report.

Maybe a better signal for future Fed policy will be Friday’s US jobs numbers. Some 200,000 jobs are expected to have been added to the US economy in December, down from 203,000 in November. The unemployment rate is expected to have remained steady at 7% in December.

Meanwhile, the continuation of the upside correctional move ahead of the heavy economic grind is possible this week unless a break back below key resistance at $1,220 proves the bullish recovery invalid and brings the bearish momentum back into focus.