Gold rises but gains capped ahead of US price data out this week

February 12, 2018

London (Feb 12)  Gold prices rose on Monday as the dollar slipped, but gains are expected to be capped ahead of inflation data from the US this week that could mean US interest rates increase more quickly than expected.

Spot gold was up 0.4% at $1,321.16 an ounce at 9.40am GMT. It has fallen more than 3% since hitting a 17-month peak at $1,366.07 in January. US gold futures rose 0.6% to $1,323.20 an ounce.

Worries about inflation in the US surfaced after data this month showed jobs growth surged and wages rose, bolstering expectations that the US labour market would hit full employment this year.

US inflation data for January is due on Wednesday and the US Federal Reserve next meets on March 20-21.

"The story is and will be about US monetary policy and dollar direction," Julius Baer analyst Carsten Menke said. "US growth is more solid, wages are rising and the worry is the Fed will be forced into more rate hikes than currently expected."

A lower US currency makes dollar-denominated gold cheaper for holders of other currencies, potentially boosting demand.

The dollar slipped against a basket of six major currencies as a bounce in equity markets ended a strong run for the greenback, used by investors as a safe place to park assets in times of financial market volatility.

"Gold has picked up a little in the last 24 hours, as a hint of dollar weakness creeps back into markets," said Jordan Eliseo, chief economist at gold trader ABC Bullion.

Hedge funds and money managers slashed their net long position in Comex gold for the first time in eight weeks in the week to February 6, and cut it in silver, US Commodity Futures Trading Commission data showed on Friday.

Gold faces strong resistance at the 100-day moving average around $1,345. A break of support at $1,300 could see the market trying to test the 21-day moving average at around $1,275.

Silver gained 0.6% to $16.44 an ounce, platinum was flat at $964.50 an ounce and palladium was up 0.7% at $983.33 an ounce.


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