Gold prices subdued as firm dollar dims safe-haven appeal

Physical gold demand in India was subdued last week despite a correction in bullion prices.
Physical gold demand in India was subdued last week despite a correction in bullion prices.PHOTO: REUTERS

BENGALURU (REUTERS) - Gold prices were subdued on Monday as the United States dollar held firm, while cautious investors awaited readings on US consumer prices due this week that could be crucial to Federal Reserve's decision on when to exit its super-supportive policy.

Spot gold was flat at US$1,787.40 per ounce, as at 0114 GMT, after having recorded a weekly decline of 2.1 per cent.

US gold futures fell 0.3 per cent to US$1,786.90. The US dollar index slightly strengthened in the Asian trade, having delivered a 0.6 per cent weekly gain, making gold more expensive for holders of other currencies.

Data on Friday showed US producer prices increased solidly last month, leading to the biggest annual gain in nearly 11 years.

The reading sent the benchmark US 10-year Treasury yield higher.

While some investors view gold as a hedge against higher inflation, higher yields translate into higher opportunity cost for holding non-interest bearing bullion.

Cleveland Fed president Loretta Mester said on Friday that she would still like the central bank to begin tapering asset purchases this year, joining the chorus of policymakers making it clear that their plans to begin scaling back support were not derailed by weaker jobs growth last month.

Physical gold demand in India was subdued last week despite a correction in bullion prices, while consumers in most other Asian hubs also stayed on the sidelines as they hoped for a clearer trend in global prices.

Speculators cut their net long positions in Comex gold by 15,324 contracts to 83,540 in week ended Sept 7, data from the US Commodity Futures Trading Commission showed.

Platinum eased 0.1 per cent to US$955.01 per ounce and touched its lowest level since November last year. Palladium hit its lowest level since August last year, but recovered lost ground to trade up 0.3 per cent at US$2,145.03. Silver was flat at US$23.72.