Singapore: Gold fell half a percent on Monday, after its biggest weekly drop since November on the prospect of a US interest rate hike in early 2015. This resulted in the boost of the dollar and dented the metal's appeal as a hedge against inflation.
A lack of activity in the physical sector also raised some concerns, with demand from China, which is likely to be subdued because of a weak yuan and the discounted prices on the Shanghai Gold Exchange, which discourage imports. Gold eased $7.14 an ounce to $1,326.80. ‘Gold is under pressure from the US dollar, as the US Federal Reserve scales back its quantitative easing programme. It has also suggested a rise in interest rates quicker than expected,’ said Ronald Leung, Chief at Lee Cheong Gold Dealers in Hong Kong.
"We can say the initial support will be $1,325 to $1,320. The downside may be $1,300, and let's see if it can break that or not. On the upside, I think $1,350 could be capped," added Leung.
US gold was at $1,327.70 an ounce, down $8.30. The dollar index was steady at 80.149, not far off a three-week peak of 80.354 set on Thursday. A stronger dollar weighs on gold and other commodities as it makes purchases in other currencies pricier.
The 99.99 per cent purity gold on the Shanghai Gold Exchange traded below cash and US gold futures. "Gold prices in Japan are still high, so there's selling from the general public. So the market is a bit balanced," said the dealer of the Tokyo Commodity Exchange
Gold investors may be shifting their attention away from Ukraine, but palladium held near its highest since August 2011 on a miners' strike in South Africa and concerns the standoff between major producer Russia and the West over Crimea could escalate.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said that its holdings rose 0.52 per cent to 816.97.
The Commodity Futures Trading Commission stated, ‘Hedge funds and money managers raised their bullish bets in gold futures and options to the highest level since December 2012, as worries about tensions in Ukraine and China's economy boosted speculative interest for a sixth straight week,
