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Gold settles below $1,290 as US stocks rebound

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Gold ended lower on Monday as a rise in consumer discretionary companies lifted U.S. shares, but the metal's losses were limited after Friday's surprisingly weak U.S. payrolls data dampened speculation the Federal Reserve will raise interest rates soon.

A recent run of forecast-beating data, including numbers pointing towards a recovering jobs market, had fueled talk that the Fed could raise interest rates sooner than expected, increasing the opportunity cost of holding non-yielding gold.

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That sent gold to a six-week low last week, but it recovered after a report on Friday showed U.S. jobs growth slowed in July, pointing to slack in the labor market that will allow the Fed to keep rates lower for longer.

U.S. gold futures for December delivery settled $5.90 lower at $1,288.00 an ounce, down about a half of a percent on the day.

Meanwhile, spot gold was lost 0.4 percent and was last trading at $1,289 an ounce after falling 1.1 percent last week for its first three-week decline since September.

Investors welcomed news that Portugal prevented the collapse of one of its biggest banks, putting some life back into European stocks following last week's slide and pushing bond yields lower across the board.

In the physical markets, buying remained subdued in the seasonally quiet summer period, even as many consumers expected prices to decline further.

For more information on gold prices, please click here.

—By Reuters. CNBC contributed to this report.