Gold holds near 3-month low on U.S. rate hike outlook

New York (Mar 9)  Gold held near a three-month low on Monday, amid growing expectations for higher interest rates in the U.S. as early as June.

Expectations of higher borrowing rates going forward is considered bearish for gold, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise.

On the Comex division of the New York Mercantile Exchange, gold futures for April delivery touched a session low of $1,166.30 a troy ounce before turning higher to trade at $1,172.70 during European morning hours, up $8.40, or 0.72%.

Futures were likely to find support at $1,141.70, the low from December 1, and resistance at $1,200.00, the high from March 6.

On Friday, gold plunged $31.90, or 2.67%, to end at $1,164.30 after hitting an intraday low of $1,162.90, a level not seen since December 1.

The Labor Department reported that the U.S. economy added 295,000 jobs in February, far more than the 240,000 forecast by economists, while the unemployment rate ticked down to 5.5% from 5.7% in January, the lowest since May 2008.

The robust jobs report fuelled expectations that the Federal Reserve will start raising interest rates as early as June.

The U.S. dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, slipped 0.3% to 97.45 early on Monday, after hitting an 11-year peak of 97.84 earlier.

Meanwhile, the euro was likely to remain under pressure as investors looked ahead to a meeting of euro group finance ministers in Brussels later in the day to discuss proposed Greek economic reforms.

Last month Athens reached a temporary agreement with its lenders to extend its bailout by four months, but must complete a bailout review by April before it can access further financial aid.

Meanwhile, silver futures for May delivery inched up 11.8 cents, or 0.75%, to trade at $15.92 a troy ounce. On Friday, silver touched $15.74, the weakest level since January 5, before ending at $15.80, down 35.1 cents, or 2.17%.

Elsewhere on the Comex, copper for May delivery tacked on 2.0 cents, or 0.76%, to trade at $2.627 a pound. Prices hit an intraday low of $2.593, the weakest level since February 24, earlier as investors digested key economic data from China.

On Sunday, China reported a trade surplus of $60.6 billion in the January-February period, compared to expectations for a surplus of $10.8 billion and up from a surplus of $60.0 in January.

Exports surged 48.3% from a year earlier last month, above expectations for a 14.2% increase, while imports tumbled 20.5%, much worse than forecasts for a decline of 10.0%.

The slide in imports pointed to persistent weakness in the economy, fuelling speculation policymakers will have to introduce further stimulus measures to boost growth.

The Asian nation is the world's largest copper consumer, accounting for almost 40% of world consumption last year.

Source: MoneyControl