Gold retreated from a one-month high in volatile Asian trade on Monday as the market succumbed to dollar strength against the euro, which reduces the yellow metal's safe-haven appeal. Spot gold was $424.40/424.90 an ounce, down from $427.00/427.70 an ounce last quoted in New York on Friday, where it hit a 1-month high of $427.70.
Activity was muted because of a holiday in Australia and dealers expected gold to trade in a familiar range this week. "We are still in range trade of around $422 to $428," said Ronald Lunge, director of Lee Cheong Gold Dealers in Hong Kong.
"The dollar is pressuring the market," he said. Some dealers said premiums for gold bars to London spot prices eased to between 30 and 40 US cents from last week's 40 to 50 cents because of slow demand.
The dollar jumped to a nine-month high against the euro on Monday after data showed a narrower-than-expected US trade deficit and on an upbeat official view of the US economy.
The single currency fell to as low as $1.2064, its lowest mark since September 8, before rebounding to $1.2109. Currency dealers said the dollar was supported by Federal Reserve Chairman Alan Greenspan's comments last week, when he told a congressional committee the US economy was on a "firm footing" and suggested interest rates still had room to rise.
Higher rates tend to boost demand for dollar deposits and may prompt some funds to switch out of assets such as commodities.
Hong Kong dealers said some Japanese investors were selling gold in the physical market, which put pressure on bullion prices. Dealers said they awaited US inflation data this week for any signs of an up-tick in prices, which could lead the Fed to raise rates at an even faster pace to ward off inflation.
The producer price index for May is due on Tuesday, while the consumer price index will be released on Wednesday. Other precious metals were mixed.
Spot silver was little changed from New York levels at $7.24/7.26 an ounce. Platinum was at $869/874 an ounce, versus $867/872 in New York. Sister metal palladium was at $184/189 an ounce, versus $183/187.
On Hong Kong's Chinese Gold and Silver Exchange, gold was quoted at HK$3,936 per teal (37.5 gram ingot) down from HK$3,940.
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