Gold hovers near 3-month low as dollar strength continues

Gold prices edged down in choppy trading on Monday as a strong dollar hurt demand for the greenback-priced metal and set it on course for a more than three-month trough hit in the previous session.

However, a fall in benchmark U.S. 10-year Treasury yields limited losses in zero-yield gold, helping keep prices above the key psychological support level of around $1,800 per ounce.

Spot gold was down 0.1% at $1,808.61 per ounce, as of 0539 GMT. U.S. gold futures dipped 0.2% to $1,804.80.

“With $1,800 being such a big round number, it’s natural for it to provide some level of support as some (traders) try to be brave and buy a dip, whilst others close out profitable shorts,” City Index’s senior market analyst Matt Simpson said.

Marking a fourth straight weekly decline, gold prices on Friday fell more than 1% to $1,798.86 per ounce, before closing at $1,811.15.

“But it’s not looking great for gold bugs right now. Even if we do see a bounce from $1,800, the momentum clearly favors a further downside,” Simpson said.

Concerns around global growth helped the dollar start the week just off a 20-year high against its peers, making rival safe-haven gold less attractive for buyers holding other currencies.

Inflation will need to move lower for “several months” before Federal Reserve officials can safely conclude it has peaked, Cleveland Fed president Loretta Mester said on Friday, adding she would be ready to consider faster rate hikes by the September Fed meeting if the data does not show improvement.

Although seen as an inflation hedge, gold is sensitive to rising U.S. short-term interest rates and bond yields, which raise the opportunity cost of holding bullion.

Spot silver eased 0.2% to $21.03 per ounce, platinum gained 0.1% to $939.70, and palladium rose 0.6% to $1,955.59.