Gold Ends Lower as Traders Watch Currency Moves

San Francisco (Nov 11)  Gold futures ended at their lowest level in more than three weeks on Monday, as a slightly firmer euro struggled to repair the damage brought about by the dollar's recent rally.

Gold for December delivery, the most active contract, settled $3.50, or 0.3%, lower at $1,281.10 a troy ounce on the Comex division of the New York Mercantile Exchange. This was the lowest settlement price since Oct. 15, when gold ended at $1,273.20 an ounce.

Gold futures had touched a low of $1,278.10 overnight, but reversed course as the euro strengthened throughout the day. The common European currency was recently up 0.3% at $1.3409.

Dollar-denominated gold futures become cheaper for investors who use other currencies when the dollar eases, luring them to the market as buyers.

Monday's currency shifts struggled to offset lingering pressure from the dollar, which touched an eight week high last week on the back of better-than-expected U.S. economic data.

On Friday, a report showed the U.S. labor market is growing stronger, and Thursday data showed the economy is expanding at a faster-than-expected pace, prompting fears that the Federal Reserve will move to reduce its bond purchases and remove a long-running source of support from the gold market.

The central bank's unconventional form of monetary stimulus spurred business activity by keeping borrowing rates low. Some investors worried the Fed's efforts would raise inflation and weaken the dollar and bought gold as a hedge.

Gold traders now shift their sights to Thursday, when Federal Reserve Chairman Nominee Janet Yellen is due to go before Congress for her confirmation hearing.

"The market is likely to focus on how the latest developments in the U.S. economy have changed her views on asset purchases by the Fed," said Walter de Wet, senior commodity strategist with Standard Bank, in a note to clients.