Gold holds near 2-1/2-week low as US rate outlook weighs

Gold steadied on Tuesday after a four-day losing streak as the dollar eased, but the metal was not too far from a 2-1/2-week low as it struggled to find direction amid uncertainty over a looming US interest rate hike.

Spot gold ticked up 0.2 per cent to $1,121.16 an ounce by 0331 GMT. It slid to $1,116.20 on Monday, its lowest since August 19. US gold was little changed at $1,120.70. The dollar index fell 0.3 per cent.

US jobs report

Investors had been waiting on Friday’s US jobs report to gauge the strength of the economic recovery and whether it would prompt the Federal Reserve to hike rates at its policy meet later this month. But the data failed to provide adequate clarity regarding a Fed move amid volatility in financial markets.

“We are unlikely to see a big move until the Fed meeting,’’ said a bullion trader in Hong Kong.

“Gold is not even reacting much to what we are seeing in the equities market.’’

Fed rate hike

Gold prices have been dented this year by expectations the Fed will hike rates for the first time in nearly a decade.

The Fed meets next on September 16-17. Investors believe higher rates could diminish the demand for non-interest-paying gold, while boosting the dollar.

“Gold continues to test support around $1,115-$1,117, with dips still well bought. Short-term we see $1,115 - $1,130 as the likely range,’’ said MKS Group trader Sam Laughlin.

China slowdown

Gold has failed to find a strong safe-haven bid despite the recent weakness in stocks due to worries over the Chinese economy, showing that gold is struggling to find direction outside of US monetary policy.

Bullion investors will be watching China’s August data over coming weeks to see if the economy is at risk of a hard landing.

A stock market crash and the unexpected devaluation of the yuan currency in August have heightened concerns about stability in the world’s second-largest economy, with some also believing the weakness could prompt the Fed to delay its rate hike.

Data on Tuesday showed China’s August exports fell a less than expected 5.5 per cent from a year earlier, while imports declined by 13.8 per cent.