Gold Dips In Asia As Dollar Direction Eyed With Steeper Yield Curve

Investing.com – Gold prices eased in Asia on Monday despite a stronger reading on the consumer-demand side in China as sentiment on the dollar is weighed with a steeper yield curve.

for April delivery fell 0.28% to $1,333.60 on the Comex division of the New York Mercantile Exchange. The fell 0.04% to 89.00.

China published its January index which showed a level of 54.7, compared to 53.6 expected and 53.9 in December.

The UK is to release data on service sector activity. Later Monday, ECB head Mario Draghi is to testify on the central bank’s Annual Report for 2016 before the European Parliament.

Investors will also be looking to political wrangling in Washington over the country’s finances ahead of the Feb. 8 spending deadline and the debt ceiling issue. In what is set to be a relatively light week on the economic calendar, central bank meetings in the UK, Australia and New Zealand will also be in focus.

Last week, gold prices fell on Friday as the dollar strengthened after the latest U.S. jobs report showed that the economy added more jobs than forecast in January and wage growth accelerated.

Prices of the precious metal have fallen back since hitting their highest level since August 2016 on January 26 as the dollar stabilized and Treasury yields have surged.

The U.S. economy created 200,000 new jobs last month, the Labor Department reported Friday and average hourly earnings rose 2.9% from a year earlier, the most since 2009.

A stronger dollar makes gold more expensive for overseas buyers. The uptick in wage growth boosted the outlook for inflation and underlined the case for the Fed to raise interest rates at a faster pace this year.

The U.S. central bank left rates unchanged last week but said it anticipated inflation would likely rise in 2018, underlining expectations that borrowing costs will continue to increase. The Fed currently projects three rate hikes for this year.

Expectations for higher interest rates are typically negative for gold as the precious metal struggles to compete with yield-bearing assets like Treasury’s when borrowing costs rise.

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