Gold comes off 10-month low as dollar eases

Gold demand in Singapore in 1993 was at 21.4 tonnes and in Malaysia it stood at 22.4 tonnes. Six years after Singapore implemented the GST in in 1994,and Singapore only recorded 12.1 tonnes while Malaysia raked up 21.1 tonnes - Reuters Photo.

BEnGALURU: Gold prices recovered slightly after touching a near 10-month low in early trade on Thursday as the dollar index eased, but growing odds of a US interest rate hike capped further gains.

Spot gold was up 0.25% at US$1,175.36 an ounce by 0711 GMT. The metal hit its lowest since Feb 5 at US$1,163.45 earlier in the session.

US gold futures rose about 0.3% to US$1,173.80 per ounce.

The dollar index, which measures the greenback against a basket of major currencies, eased 0.26% to 101.240.

?Gold has been sensitive to the US monetary policy and dollar movements," said Mark To, head of research at Hong Kong's Wing Fung Financial Group. 

"Inflation as well as pace of interest rate hike expectations among the investors are increasing along with the opportunity cost of holding gold."

The metal has been under constant pressure from a strong US dollar and climbing Treasury yields since President-elect Donald Trump's policy plan signalled faster inflation.

Strong US data on Wednesday pointed to economic strength which could further cement the case for an interest rate hike from the Federal Reserve this month.

Dallas Fed Bank president Robert Kaplan suggested on Wednesday it was time for an interest-rate raise as the US economy was making good progress toward full employment with inflation heading toward the Fed's 2% goal.

Traders see about a nine in 10 chance that policymakers will raise rates when the Fed meets in December.

Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.13% to 883.86 tonnes on Wednesday.

Elsewhere, political uncertainty in Europe persisted ahead of Italy's referendum on Sunday, capping the euro, while European Central Bank (ECB) president Mario Draghi warned of risks to the continent's prosperity.

Eurozone inflation hit a 31-month high in November, providing modest relief for the ECB ahead of an interest-rate decision next week.

?Any rise in geopolitical risks or investor uncertainty in the months ahead may spur demand for perceived 'safe-haven' assets, especially gold, but also silver," said James Steel, chief metals analyst for HSBC Securities.

Silver was 0.4% higher at US$16.54 an ounce.

Platinum crawled up 0.1% to US$912 after hitting its lowest since Feb 8 at US$895 earlier in the session.

Palladium was unchanged at US$770.08. The metal touched its highest since June 2015 at US$774.60 earlier. - Reuters