Investing.com – Gold prices fell in Asia on Monday as the dollar gained and the euro dropped as investors mulled the implications of the disputed referendum on Catalonia independence in Spain on the euro zone and a sentiment survey out of Japan in a thin trading day with China’s markets shut for the week and holidays regionally expected to see thin flows.
Gold is priced in dollars, making it more expensive in other currencies when the greenback gains.
Elsewhere. the Bank of Japan released its Tankan survey for the third quarter with investors focused on the large manufacturers index as it rose to 22, compared with an expected reading of 18.
This week, comments by Fed Chair Janet Yellen will be closely watched for further hints on the timing of the next rate hike along with Friday’s U.S. jobs report.
Market watchers will be looking ahead to remarks by European Central Bank President Mario Draghi on Wednesday.
Also on Monday, financial markets in China will remain closed for a holiday along with South Korea, India and Hong Kong and the UK is to release data on manufacturing activity.
Last week, gold prices ended lower Friday as weak U.S. consumer spending and inflation data did little to alter expectations for a third interest rate increase by the Federal Reserve this year.
Friday’s losses meant that the precious metal ended the week down 0.98%, helping gold post a monthly loss of 2.83%, its largest monthly decline so far this year as the dollar strengthened.
The dollar has risen in recent weeks as investors grow more optimistic about the prospect for U.S. rate hikes and tax cuts that some expect to boost the U.S. economy.
Data on Friday showed that U.S. consumer spending barely rose in August. Inflation also remained sluggish with the core personal consumption expenditures price index rising 1.3% year-on-year, slowing from 1.4% in July.
The core personal consumption expenditures price index is the Fed’s preferred inflation measure and has a 2% target.
The data did little to temper rate hike bets after Yellen indicated earlier in the week that the central bank was sticking to plans for a third rate hike this year and three in 2018.
Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.
Among base metals, copper was quoted up 0.68% to $2.969 a pound as the People’s bank of China cut its cash reserve ratio at the weekend even as there was an expected drop in metals demand because of the week-long holiday in China, the world’s top importer.
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