Gold holds tight range as investors await U.S. elections

Edgar Su | Reuters

Gold inched lower within a narrow range on Monday ahead of the U.S. congressional elections, which may fuel interest in bullion as a hedge against risk if the result sparks volatility in financial markets.

Spot gold was down 0.18 percent at $1,230.21 per ounce, trading in an $8 range. U.S. gold futures settled at $1,232.30 per ounce.

"The market is just quiet ahead of the (U.S.) mid-term elections and people are waiting to see how it is going to play-out after tomorrow," said Bob Haberkorn, senior market strategist at RJO Futures.

Opinion polls show strong chances that the Democratic Party may win control of the House of Representatives in the Nov. 6 midterm elections.

"Should the Democrats surprise, we would expect pressure on the dollar and a move higher in the metals complex. Republican control of the both the House and Senate should create selling pressure," Peter Hug, global trading director at Kitco Metals, said in a note.

The dollar paused after three consecutive weeks of gains as investors took profits before the elections.

Analysts said profit taking after last week's rally was also putting slight pressure on gold.

The metal is down more than 5 percent this year, with investors turning to the dollar for safety as the U.S.-China trade war unfolded, and higher U.S. interest rates offered more attractive returns than the non-yielding metal.

Bullion traders also awaited this week's Federal Reserve meeting to gauge the outlook for U.S. monetary policy.

"No one expects Fed to raise interest rates this week. It is most likely going to happen next month. Gold is going to have a hard time rallying into the next Fed meeting in December," Haberkorn said. "If the Fed speech (this week) is as hawkish as it has been then why be long and fight it."

Hedge funds and money managers raised their net short position in gold to a three-week high in the week ended Oct. 30, according to U.S. Commodity Futures Trading Commission data.

Also, highlighting investors' bearish sentiment toward bullion were holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, which fell 0.23 percent to 759.06 tonnes on Friday.

Among other precious metals, silver fell 0.77 percent to $14.60 per ounce, while palladium jumped 1.62 percent to $1,134.10.

Platinum was down 0.47 percent at $862.90.60 per ounce, after hitting its highest level since June 25 at $873.

The gains in platinum could chiefly be attributed to short covering, considering the CFTC data, which showed "net short positions have been almost entirely reduced," Commerzbank analysts said in a note.