Gold firm but hemmed in tight range, shrugs off dollar

-A +A

LONDON (April 3): Gold prices rose on Monday despite a firmer dollar, but was trading in a tight range as the market sought more direction from key US economic data expected later in the week.

Spot gold was 0.23 percent higher at US$1,245.71 per ounce at 1530 GMT, trading in the range between US$1,253.52-US$1,244.05.

"Gold is stuck between US$1,238-US$1,260 with the risk to skewed to downside based on rising expected interest rates and failure to break higher which has left it vulnerable to profit-taking in the short term," said Ole Hansen, the head of commodity strategy at Saxo Bank.

Hansen said focus now turned to US payrolls data on Friday which could provide more clues on the direction of interest rates.

Supporting gold was geopolitical tension sparked by US President Donald Trump who on Sunday held out the possibility of using trade as a lever to secure Chinese cooperation against North Korea.             

There were comments from Trump to China over the weekend saying "if you can't sort out North Korea, we will" so there is still some geopolitical risk out there which attracts demand for gold," said Ole Hansen, head of commodity strategy at Saxo Bank.

Gold is often seen as an alternative investment during times of geopolitical and financial uncertainty.

The dollar index hit a two-week high, up 0.3 percent.      

US consumer spending barely rose in February amid delays in the payment of income tax refunds, but the biggest annual jump in inflation in nearly five years supported expectations of further interest rate hikes this year.             

Spot gold notched a quarterly gain of about 8.4 percent on Friday, marking its best quarter in a year, mostly driven by uncertainties around Trump's policies and elections in Europe.

Hedge funds and money managers raised their net long position in COMEX gold for the second straight week in the week to March 28, and boosted it slightly in silver, US Commodity Futures Trading Commission data showed on Friday.             

In other precious metals, spot silver edged down 0.1 percent to US$18.23 per ounce but held near four-week highs.

Platinum rose 1.1 percent to US$956.10, after recording its best quarter in a year. Palladium was up 0.7 percent at US$800.60 an ounce and is up about 17 percent so far this year.

"We think that both the gold and silver complexes will make fresh highs this month ahead of the French elections, but likely fade in their immediate aftermath," said INTL FCStone analyst Edward Meir.