Investing.com - Gold prices edged higher on Monday, but remained close to two-week lows as prospects for higher U.S. interest rates continued to underpin dollar demand.
U.S. gold futures for December delivery were up 0.16 % to $1,164.7 an ounce.
Gold hit lows of $1,163.3 on Friday, the weakest since October 13 after rallying more than 1% earlier in the session after China’s central bank unexpectedly cut interest rates.
The dollar rose to two-and-a-half month highs against the other major currencies on Friday after China’s rate cut, before turning slightly lower on Monday as investors took a breather following the rally.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, slid 0.16% to 97.03, easing back from Friday’s highs of 97.3.
China’s rate cut, the sixth rate cut since last November reinforced the diverging monetary policy stance between the Federal Reserve and central banks in the rest of the world.
The Fed is currently expected to start hiking interest rates sometime in early 2016.
The move came one day after European Central Bank President Mario Draghi indicated that further monetary easing is likely later this year.
The remarks highlighted the divergence in monetary policy between the U.S. and other central banks.
An increase in interest rates would boost the greenback by making it more attractive to yield-seeking investors, while weighing on gold.
Investors were looking ahead to Wednesday’s monetary policy announcement by the Fed for fresh indications on the timing of an initial rate hike.
Elsewhere in metals trading, U.S. silver futures for December delivery were up 0.52% to $15.91 an ounce. Copper for December delivery was up 0.89% to $2.371 a pound.