Gold dips towards monthly decline as dollar recoups losses

London (Aug 31) - Gold eased from its highest in nearly two weeks on Monday as the dollar recouped some of its losses and investors booked profits after a near-2% surge in the previous session, putting the metal on course for its first monthly dip in five.

Spot gold retreated 0.1% to $1,963.33 an ounce by 1008 GMT, having touched its highest since Aug. 19 at $1,976.14, and was down 0.6% over the month. U.S. gold futures fell 0.2% to $1,970.90.

"Though the fundamentals look steady for gold and it has the potential to rise above $2,000 in the short to medium term, we will see some corrections on the way," said Bernard Sin, group head of trading at MKS. Marginal gains in the dollar while UK markets were closed for a public holiday are weighing on gold, he added.

The dollar index steadied after initial declines but was still down for the month.

"What the Fed does next is crucial for gold," UBS analysts said in a note.

Real rates should ease further and lift gold, but ambiguity over the U.S. Federal Reserve's September meeting is a risk, they added. The Fed signalled that its primary overnight interest rate could remain close to zero for years as policymakers coax higher inflation, which decreases the opportunity cost of holding non-yielding gold.

Gold has gained nearly 30% this year, with its safe-haven appeal bolstered by growing economic uncertainty stemming from the COVID-19 pandemic as well as the November U.S. elections.

Silver jumped 1.2 % to $27.83 an ounce, on track for a fifth straight monthly gain with an advance of nearly 14%. Platinum was steady at $930.96 while palladium firmed by 0.2 % to $2,209.57.

Reuters