Gold prices slipped on Monday as the dollar gained on stronger-than-expected US manufacturing data and investors awaited jobs data later this week for clues about whether US interest rates would rise by the year-end. Spot gold reversed gains to fall 0.3 percent to $1,311.54 an ounce by 3:03 p.m. EDT (1903 GMT), with volumes muted as China markets were closed for the National Day holidays from Oct. 1-9.
US gold futures settled down 0.3 percent at $1,312.70 per ounce. "Prices are slowly drifting lower ... but they will not come down too much, particularly ahead of Friday," said Societe Generale analyst Robin Bhar. Analysts will look to the US non-farm payrolls report on Friday for more clarity on whether the US Federal Reserve is on track to tighten credit by December.
Gold is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar and making commodities more expensive for non-US buyers. The dollar strengthened against a basket of currencies.
"This week ... there are plenty of US macro data to look forward to which could have a big impact on the near-term direction of the dollar, and in turn buck-denominated precious metals," said Fawad Razaqzada, technical analyst for Forex.com. Sterling gold prices rose after the pound dropped to three-year lows versus the euro, and neared three-decade lows against the dollar. This prompted some British buyers of physical metal to cash in gains after British Prime Minister Theresa May set a March deadline for the formal departure process from the European Union to begin.
"We're seeing some selling back, because obviously sterling has collapsed a bit, which has pushed the gold price up in sterling terms, which has seen people taking a profit and selling rather than buying," one London-based gold dealer said. Also weighing on gold were reports that Deutsche Bank was negotiating a reduced settlement with the US Department of Justice, which boosted risk appetite among investors. Silver fell 2.2 percent to $18.72 an ounce, platinum slipped 1.7 percent to $1,006.20, and palladium was down 1.4 percent at $709.75.