Precious metal adds to gains on softer equities, dollar

December 21, 2015 7:34 AM

"Given the uninspiring chart patterns, we have to suspect that the path of least resistance remains lower still for the precious group as a whole, exacerbated by a stronger dollar and a more aggressive Fed," Meir said.

Gold bars are displayed at South Africa's Rand Refinery in Germiston May 30, 2006. REUTERS/Siphiwe Sibeko

Gold edged up on Monday, adding to sharp gains from the previous trading session, as weakness in the dollar and equities helped the metal recoup some losses from a U.S. interest rate hike last week.

Concerns that demand for non-interest-paying bullion will take a hit from the rate hike continue to cast a shadow, and will likely limit any rally in gold.

Spot gold had ticked up 0.3 percent to $1,069.36 an ounce by 0640 GMT, adding to the 1.4 percent gain on Friday.

"We believe that trading conditions will start to thin out, but that does not mean trading ranges will necessarily narrow," said INTL FCStone analyst Edward Meir.

Liquidity will start to drop as trading enters the last two weeks of the year.

The metal saw some safe-haven bids on Friday after global equity markets fell sharply as slumping oil prices raised concerns about slower growth, while the dollar slipped against the yen on views the Bank of Japan may not ease policy as much as expected. [MKTS/GLOB]

But the outlook for the dollar is bullish as the Fed is set to hike rates further next year.

Gold's Friday rally followed a 2 percent loss in the session prior to that, the metal's biggest single-day loss in five months, as the Federal Reserve raised U.S. interest rates for the first time in nearly a decade.

In the run up to the Fed move, speculators built a record bearish bet in COMEX gold, U.S. Commodity Futures Trading Commission data showed on Friday, a factor that could trigger some short-covering.

"We believe the pace of U.S. rate hikes will decide the fate of gold," ANZ said in a note.

The U.S. central bank had said last week its median policymaker forecast expected the equivalent of four quarter-point hikes next year.

The metal could revisit $1,000 for the first time in six years if it breaks below its early December low at $1,045, according to technical analysts.

Assets in SPDR Gold Trust, the top gold-backed exchange-traded fund, rose 2.98 percent to 648.92 tonnes on Friday, the first increase in two months.

Total holdings had fallen to a seven-year low last week. [GOL/ETF]

PRICES AT 0640 GMT

Metal Last Change Pct chg

Spot gold 1069.36 3.55 0.33

Spot silver 14.124 0.054 0.38

Spot platinum 853.8 -4.75 -0.55

Spot palladium 556.75 1.53 0.28

Comex gold 1068.7 3.7 0.35