Gold climbs, but gains limited by rate hike prospects

Gold prices edged up in a technical rebound on Monday after one-month highs hit last week were undercut by the prospects of more interest rate hikes from the U.S. Federal Reserve.

Spot gold edged 0.2 percent higher to $1,174.91 an ounce by 0332 GMT. Gold gained nearly two percent last week, its biggest weekly rise since early November, although it fell back on Friday as Fed officials commented on data that pointed to an improving U.S. economy.

U.S. gold futures were also up 0.2 percent on Monday at $1,175.40 per ounce.

“Some kind of rebound in gold prices is still in place,” said Mark To, head of research at Hong Kong’s Wing Fung Financial Group.

“However, the impact of monetary police changes like rising U.S. interest rates will be felt gradually and the quick rebound in gold price should be finished.”

Spot gold is still up nearly 5 percent from mid-December after touching 10-month lows that sparked higher demand on the physical side.

Spot gold may retest a resistance at $1,182 per ounce, a break above which could open the way towards $1,219 an ounce, according to Reuters technical analyst Wang Tao.

U.S. employment increased less than expected in December but a rebound in wages pointed to sustained labor market momentum that sets up the economy for stronger growth and the prospect of further interest rate increases this year.

Chicago Federal Reserve President Charles Evans said on Friday the central bank could raise interest rates three times this year, faster than he had expected just a few months ago.

Evans and other regional Fed presidents are scheduled to speak this week, and the outlook for U.S. rates may become even clearer when Chair Janet Yellen appears at a webcast town hall meeting with educators on Thursday.

“As long as the U.S. economic data is good, people are expecting rate hikes to be more hawkish and short gold at $1,200 levels,” To said.

Expectations of U.S. interest rate hikes lowers demand for the non-interest-paying bullion.

Hedge funds and money managers cut their bullish positions in COMEX gold contracts for the eighth straight week in the week to Jan. 3, taking their holdings to the smallest in 11 months, U.S. Commodity Futures Trading Commission (CFTC) data showed on Friday.

Among other precious metals, silver shed 0.1 percent to $16.46 an ounce and platinum gained 0.1 percent at $968.24.

Palladium was up 0.6 percent at 760.50 an ounce, after hitting its highest in more than a month at $763.10 earlier in the session.

Source: Reuters