Gold futures bounce off 11-week low as U.S. dollar slips

Investing.com - Gold prices rose modestly on Monday but held near an 11-week low amid speculation the Federal Reserve could raise interest rates after the summer.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery inched up $2.90, or 0.25%, to trade at $1,171.00 a troy ounce during U.S. morning hours. Prices held in a range between $1,168.60 and $1,177.00.

On Friday, gold prices slumped to $1,162.10, a level not seen since March 19, before settling at $1,168.10, down $7.10, or 0.6%.

Futures were likely to find support at $1,162.10, the low from June 5, and resistance at $1,186.60, the high from June 4.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, dipped 0.6% to hit 95.82, moving off Friday’s highs of 96.95.

The greenback weakened after rallying sharply on Friday after a robust U.S. jobs report bolstered expectations for a rate hike from the Federal Reserve later this year.

The Labor Department reported that the U.S. economy added 280,000 jobs in May, well ahead of economists forecast for 220,000.

The upbeat data underlined the view that the economy is on track to rebound after a weak first quarter and bolstered expectations that the Fed could start raising rates at its September policy meeting.

Expectations of higher borrowing rates going forward is considered bearish for gold, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise.

Meanwhile, developments surrounding talks between Greece and its international creditors remained in focus.

Over the weekend European Commission President Jean-Claude Juncker urged Greek Prime Minister Alexis Tsipras to come up with alternative economic reforms "swiftly" so that negotiations could continue this week.

Athens delayed a key debt payment to the International Monetary Fund on Friday after Tsipras rejected the proposed reforms put forward by the EC as “absurd”.

Also on the Comex, silver futures for July delivery shed 2.7 cents, or 0.17%, to trade at $15.95 a troy ounce. Silver prices fell to $15.93 on Friday, the weakest level since May 1, before closing at $15.98, down 11.9 cents, or 0.74%.

Elsewhere in metals trading, copper for July delivery tacked on 0.7 cents, or 0.25%, to trade at $2.699 a pound. On Friday, futures slumped to $2.670, a level not seen since April 23, before inching up 0.5 cents, or 0.2%, to settle at $2.692.

Official trade data released Monday showed that China’s copper arrivals in May fell 16.3% from a month earlier to 360,000 metric tons.

The country’s trade surplus widened to $59.5 billion last month from $34.2 billion in April, compared to estimates for a surplus of $45.0 billion. Chinese exports fell 2.5% from a year earlier, while imports tumbled 17.6%, worse than forecasts for a decline of 10.7%.

A slowdown in domestic demand indicated a recovery in the broader economy remains fragile and may need further government stimulus.

China's economy grew at the slowest pace in six years in the first quarter, underling speculation policymakers will have to introduce further easing measures to jumpstart the economy amid lackluster growth.

Since November, the People's Bank of China has introduced a series of stimulus measures, including lowering interest rates three times and cutting the reserve requirement ratios of major banks twice, in order to spur economic activity and boost growth.

The Asian nation is the world's largest copper consumer, accounting for nearly 40% of global demand.