Tokyo - Gold fell below $990 an ounce on Monday as a rise in the dollar versus the euro weighed on the precious metal, whose inability to stay above $1 000 has disappointed some investors.
Gold's inverse relationship with the dollar over the past few weeks has become stronger. Gold is often considered an alternative asset to the greenback, while a higher dollar makes commodities expensive for holders of other currencies.
Spot gold briefly touched the day's high of $995.50 an ounce before retreating to $987.60, down 0.3% from New York's notional close of $990.95.
US gold futures for December delivery eased 0.2% to $990.0 an ounce from $991.6 per ounce on the Comex division of the New York Mercantile Exchange. On Friday, the contract fell $7.30.
"Unwinding of euro long positions is propping up the dollar. A strong dollar trend is seemingly in place again, and that is negative for gold," said Kaname Gokon, deputy general manager at the research section of Okato Shoji Co, a commodity brokerage.
"But gold market sentiment doesn't look so bad as buying is expected at the $990-$985 level," he said.
The euro fell 0.8% from late Friday in New York to $1.4578, dragged down by its fall against the yen and cutting gains against the dollar made on Friday after data showed U.S. consumer sentiment hit its highest level since January 2008..
Against the yen, the dollar fell as low as ¥88.23, its lowest in eight months, before back clawing above ¥89, amid debate over whether Japanese authorities would intervene to stem the currency's gain.
Last week, spot gold fell 1.5% in its biggest weekly loss in 11 weeks, ending five straight weeks of gains.
On Friday, gold hit a two-week low of $984.70 amid investor frustration with the precious metal's inability to stay above $1 020 an ounce hit on September 17.
G20 leaders last week pledged to keep emergency economic support in place until a sustainable recovery was assured, an increasing sensitive issue for global financial markets.
Yet, uncertainty over the global economy is putting a lid on gains in equity markets. Lower stock markets reduce gold's allure as an inflation hedge.
Data late last week showed a recent rally in gold prices had been partly driven by buying by short-term investors.
The non-commercial net long position in gold futures on the Comex division of the New York Mercantile Exchange stood at an all-time high of 236 749 lots for the week ended September 22, figures from the Commodity Futures Trading Commission showed.
The net long positions marked record highs for a third straight week.
The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings stood at 1 094.107 tons on Friday, unchanged from the previous business day.
- Reuters