Gold Slips as Dollar Strengthens

Gold prices were trading lower on the London spot market on Monday on the back of the continued strength in the dollar that has been spurred by positive U.S. data last week.

Spot gold was down by 0.32% at $1,083.45 a troy ounce in morning European trade.

Monday’s fall in gold, and other precious metals, comes after a strong rally on Friday, when these metals confounded expectations by gaining after the strong U.S. labor data.

Now, a stronger dollar is driving prices down amid a lack of fresh news for gold since Friday, according to Carsten Menke, commodities research analyst at Julius Baer.

The WSJ Dollar Index, which measures the dollar against a basket of other currencies, was up 0.41% on Monday morning. Gold is more expensive for investors who hold other currencies when the dollar rises.

On Friday, gold jumped to a more than two week high. That jump was likely due to short covering, according to Commerzbank.

“Gold proved solid as a rock on Friday and achieved significant gains despite facing strong headwind,” the bank said.

On Friday, the latest U.S. jobs report was above analyst expectations in October, solidifying investors’ view that the Federal Reserve will raise interest rates next week.

In the past, a strong jobs has been bearish for gold, as investors move away from the precious metal in anticipation of rising rates. Gold struggles to compete with other instruments when rates rise, as the metal offers no yield and costs money to hold.

Looking ahead, the market is likely to be quiet this week, with few surprises, according to Mr. Menke.

“People are now really preparing for the holidays, and would be glad to have some less volatility in the market,” he says.

The other precious metals were mixed Monday morning. Silver was up 0.15% at $14.58 an ounce, palladium was down 1.24% at $559.20 an ounce and platinum was down 0.23% GBP876.30.