Gold price rises as shifting Fed rate-hike expectation hurts dollar

New York (Jan 7)  Gold rose on Monday as the dollar fell on expectations that the U.S. Federal Reserve would halt its rate-hiking cycle for the year, lifting demand for the metal from holders of other currencies.

Spot gold was up about 0.5 percent at $1,291.47 per ounce as of 1106 GMT. U.S. gold futures gained 0.6 percent to $1,292.90 per ounce.

"We are seeing buyers returning to the market on dips," said Saxo Bank analyst Ole Hansen, adding that the dollar weakness supported prices.

Gold fell about 0.7 percent the previous session, its biggest one-day fall in about two months on the back of robust U.S. jobs data.

But Hansen said demand for gold as a safe haven would remain because "a dovish Fed is more of a potential worry that the U.S. economy is not as strong as the market expects."

The dollar weakened on Monday on growing bets the U.S. Federal Reserve would pause its rate hike cycle in the coming months after Friday's comments from Chairman Jerome Powell. Powell said the central bank would be more sensitive to downside risks in the market, adding that it was "prepared to shift the stance of policy" if needed. Gold tends to gain when interest rate hike expectations ease because lower rates reduce the opportunity cost of holding non-yielding bullion.

"The main trend remains bullish (for gold). From a technical point of view, traders are now watching the two key levels of $1,277 and $1,300, which are new support and resistance levels respectively," ActivTrades chief analyst Carlo Alberto De Casa said in a note.

Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose to 798.25 tonnes on Friday, their highest since July 31, 2018. Among other precious metals, palladium gained 0.5 percent to $1,307.41 after touching a record high $1,313.24 earlier in the session.

Silver was up 0.4 percent at $15.76 per ounce, while platinum rose 0.5 percent to $826.70 having touched a more than one-month high of $831.10 earlier in the session.