Gold Gains Ground But Still Set For Biggest Decline In Six Months

London: Gold rose on Tuesday, rebounding from a three-and-a-half-month low hit in the previous session, but remained on track for its biggest monthly decline since November on broad strength in the dollar and growing expectations of an imminent U.S. rate hike.

Spot gold was up 0.5 per cent at $1,210.86 an ounce by 0942 GMT, having fallen by as much as 1 percent on Monday to $1,199.60. That was its lowest since Feb. 17, pressured by strength in the dollar and a rise in global share prices, increasing investors' risk appetite and leaving gold set for a 6.3 per cent decline in May.

Spot silver was headed for its biggest monthly loss since September 2014, down almost 10 percent. It touched a seven-week low in the previous session before recovering to $16.06 on Tuesday.

The lack of a physical demand base has exposed gold to some of the moves seen recently, Mitsubishi Corp analyst Jonathan Butler said.

U.S. data on Friday showed that hedge funds and money managers cut their bullish bets in U.S. gold futures and options to their lowest in almost two months.

Gold, which had risen 16 per cent in the first quarter, has been under pressure since the release of the minutes from the Federal Reserve's April meeting boosted expectations of an imminent rise in U.S. interest rates. Subsequent comments from key central bank officials, including Fed Chair Janet Yellen, have suggested an increase will come in June or July.

The dollar hovered near its highest in two months against a basket of currencies on Tuesday.

"Short-term downside risks are primarily related to a further strengthening of the U.S. dollar and a further cooling of futures market sentiment," Julius Baer said in a note.

Investors will monitor May U.S. private-sector ISM manufacturing data, due on Wednesday, and non-farm payrolls on Friday. Solid readings could heighten expectations for a move as early as the Fed's June 14-15 policy meeting.

An increase in rates would raise the opportunity cost of holding gold, which does not earn interest. It would also bolster the dollar, making gold more expensive for buyers in other currencies.

Among other precious metals, spot platinum rose 1.3 per cent to $972.30 an ounce, having hit its lowest in seven weeks in the previous session.

Spot palladium, meanwhile, gained 0.9 per cent to $544.10 but was still heading for its biggest monthly loss since November.

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)