Gold logs modest gain, boosted by weaker dollar

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Gold prices settled slightly higher on Monday as the dollar slipped, but strong U.S. economic data capped the metal's gains.

Platinum group metals extended gains after posting their strongest weekly performance in six on supply worries due to strikes at South African mines.

U.S. gold futures for June delivery ended 40 cents higher at $1,293.80 an ounce, having earlier touched a session high of $1,305.70 an ounce.

Spot gold rose 0.8 percent to $1,293 an ounce, recovering after two consecutive sessions of losses.

"There are contradicting factors keeping the gold market in the current narrow trading range ... you have a softer dollar and political tensions like the Ukraine conflict on one side,'' Commerzbank analyst Carsten Fritsch said.

"Meanwhile, lackluster investment demand in terms of ETFs and reports of rather soft physical demand prevented prices to increase.''

The dollar was down 0.1 percent against a basket of currencies and European equities dipped, indicating reduced risk appetite that would support gold.

Gold / US Dollar Spot

However, the precious metal looked less attractive compared with U.S. bonds as strong U.S. housing data on Friday has pushed the 10-year U.S. Treasury yield back above 2.5 percent from a six-month low of 2.47 percent.

Returns on U.S. bonds are closely watched by the gold market, given that the metal pays no interest. Expectations that the European Central Bank will cut interest rates soon to support the euro zone economy, possibly at its policy meeting early next month, are having an uncertain impact on gold.

``The ECB's loose monetary policy should be bullish for gold but the downside is that it makes the euro weaker, lifting the dollar up so it might not be seen in the dollar gold price,'' Macquarie analyst Matthew Turner said.

Gold, often seen as a safe-haven investment, has gained 7.5 percent this year on the back of tensions between Russia and the West over Ukraine though it has fallen back recently due to outflows from gold funds and strong economic data.

Holdings of the SPDR Gold Trust, the world's top gold-backed exchange-traded fund, fell 0.26 tons to 781.99 tons on Friday, in a sign of ebbing investor demand.

Hedge funds and money managers cut their bullish bets on gold futures and options, according to data from the Commodity Futures Trading Commission on Friday.

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