Gold prices eased on Monday as the US dollar gained some lost ground and continued gains in equities weighed on the bullion.

However, the yellow metal hovered near a 17-month high hit last week as the greenback hit a three-year low after US Treasury secretary Steven Mnuchin backed a weaker currency.

Spot gold was down 0.2 per cent at $1,347.60 per ounce, as of 0739 GMT. US gold futures for February delivery slipped 0.5 per cent to $1,345.80 per ounce.

The US dollar is trying to climb back up and that is weighing on gold currently, according to Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

“There is a lot of dollar-related buying and selling in the gold market right now.” The dollar crawled up from lows but struggled to pull ahead from six straight weeks of losses on its evaporating yield advantage and doubts about Washington's commitment to a strong currency.

A stronger dollar makes bullion more expensive for the holders of other currencies. Earlier in the session, the dollar index against a basket of six major currencies , rose 0.2 per cent to 89.215, extending its rebound from 88.429, a three-year nadir set on Thursday.

Meanwhile, Asian shares extended their bull run amid upbeat corporate earnings and strong global economic growth.

“However, gold's weakness due to a stronger dollar and equity markets could be temporary,” said Hareesh V, head of commodity research, Geojit Financial Services.

“Gold will touch the $1,400-an-ounce level again as long as it doesn't break the $1,260 mark.” The yellow metal had dropped below the $1,400-an-ounce level in Sept. 2013 and has not crossed above the level since.

“The recent strength in equity markets has been keeping gold prices from going higher. When equities start to come down, gold will definitely be the first gainer,” Hareesh added.

“So, technically, we see a rally, but it has to break the $1,400 mark first it's a very critical level.” Spot gold may drop to $1,335 per ounce, as a support at $1,347 may not hold, according to Reuters technical analyst Wang Tao.

In other precious metals, silver fell 0.4 per cent to $17.33 per ounce. It rose about 2.3 per cent last week, its biggest weekly gain for the year, so far. Platinum slipped 0.5 per cent to $1,004.74 per ounce, after dipping 0.3 per cent last week in its first weekly decline in seven.

Palladium declined 0.4 per cent to $1,087.70 per ounce. In the previous session, it touched $1080.00, its lowest since January 11.

Related Topics
comment COMMENT NOW