Gold futures rallied from three straight sessions of weakness on Monday on a surge in haven demand over economic volatility in Turkey and Greece and US stocks and the US dollar weakened.
“The Greek saga looks like it will be deferred, but remains in the background, with the metals taking their cue from the U.S. dollar exchange rate and equity values today,” Peter Hug, global trading director at Kitco Metals, told Market Watch in a phone call.
“$1,165 to $1,178 is most likely to define the range.”
The prices, however still hovered just above 11 week lows on anxiety that Friday’s better than expected non-farm payrolls data would push the Federal Reserve to hike the interest rates by the end of the year.
“There is still potential for gold prices to continue dropping, but it will be dependent on how positive the U.S. data is,” Bernard Dahdah, an analyst at Natixis, told Reuters.
“Gold is not a yield-earning investment and we know that it costs you money to hold it in large quantities,” he said. “All these incentives of yield-earning investments are really taking their toll on gold.”
A rise in the interest rates would be bearish for the demand of non-interest bearing commodities like gold which rely on price changes for profitability.
Gold for August delivery, the most actively traded contract, traded up $5.50 or 0.5% to end at $1,173 a troy ounce on the Comex Division of the New York Mercantile Exchange after ending the previous three sessions more than 2% lower.
Gold for immediate delivery settled up 0.2% at $1,174 an ounce.
A weaker dollar also aided the rally with a weaker greenback easing pressure on the commodity. A weaker dollar is bullish for gold demand as it makes it cheaper for holders of foreign currencies.
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