Gold prices turned lower on Monday, after initially rising to three-week highs as the precious metal’s sharp decline in 2013 spurred increased physical demand from China.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,236.90 a troy ounce during European morning trade, down 0.13%. Gold futures earlier touched session highs of USD1,245.70, the strongest level since December 17.
Gold futures were likely to find near-term support at USD1,221.53, Friday’s low and resistance at USD1,252.10, the high of December 16.
Gold prices rose to three week highs amid reports of rising demand for gold bars and jewelry in Asia, which brought in bargain hunters who viewed the yellow metal as an attractive buy.
Gold’s gains came after the precious metal tumbled 28% in 2013, the worst yearly performance since 1981 and the first annual loss since 2000. Gold futures were driven lower as expectations for the Federal Reserve to start scaling back stimulus measures weighed.
Gold received an additional boost following sharp falls in Asian equities markets overnight, which bolstered safe haven demand for the metal.
But gold gave up gains as demand for the dollar continued to be underpinned in the wake of cautiously optimistic comments from outgoing Federal Reserve Chairman Ben Bernanke on the U.S. economy.
Speaking Friday, Bernanke said the U.S. economy should continue to improve in 2014, fuelling expectations for further reductions in stimulus by the U.S. central bank.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was last down 0.07% to 80.97, not far from a six week high.
Dollar weakness usually benefits gold, as it boosts the metal''s appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
Elsewhere on the Comex, silver futures for March delivery were down 0.65% to USD19.990 a pound, while copper for March delivery was down 0.63% at USD3.334.
The drop in Copper came after data over the weekend showed that activity in China’s services sector slumped to the weakest level since August 2011 in December, fuelling concerns over the demand outlook in the world’s second largest economy.