Gold edges up; looming US rate hike weighs on momentum

Gold prices ticked up amid a softer dollar on Monday, but lacked impetus to push higher weighed by expectations of an increase in interest rates in the United States.

Spot gold was up 0.2 percent at $1,249.90 an ounce, as of 0751 GMT, after hitting its lowest since July 26 at $1,243.71 last week.

U.S. gold futures were 0.3 percent higher at $1,251.70.

The dollar gave up some early gains on Monday, but losses were limited as stronger-than-expected U.S. jobs data and expectations of higher interest rates in the United States provided underlying support.

U.S. employment data on Friday showed jobs increased in November, painting a portrait of a healthy economy that analysts say does not require the kind of fiscal stimulus that President Donald Trump is proposing, even though wage gains remain moderate.

"Expectations this week are that bullion will hold a narrow range into Wednesday's FOMC rates decision, while following Friday's stronger than expected U.S. jobs data we see a 90 percent chance that interest rates will be raised, with the potential that gold may extend recent weakness toward $1,200" MKS PAMP trader Sam Laughlin said in a note.

The Federal Reserve is widely expected to raise benchmark interest rates at its two-day policy meeting starting on Tuesday, and provide outlook on further rate hikes next year.

Higher U.S. rates tend to boost the dollar and push bond yields up, putting pressure on greenback-denominated, non-yielding gold.

"Gold will remain under further modest pressure. ..However, any decline is expected to be modest as the rate rise is largely anticipated," said John Sharma, an economist with National Australia Bank.

Meanwhile, newly launched bitcoin futures on the Chicago-based CBOE Global Markets exchange and shot above $18,000 on Monday, having opened at $15,460.

"It seems that the bitcoin mania has swept a lot of investors. However, the recent spike in volatility of bitcoin futures might lure investors away from the cryptocurrency and into gold," Sharma said.

The United States, Japan and South Korea will hold two days of missile tracking drills starting on Monday, Japan's Maritime Self-Defence Force said, as tensions rise in the region over North Korea's fast-developing weapons programmes.

Spot gold still targets $1,239 per ounce, Reuters technicals analyst Wang Tao said.

Hedge funds and money managers sharply reduced their net long positions in COMEX gold and silver contracts in the week to Dec. 5, U.S. data showed on Friday.

Meanwhile, silver was down 0.1 percent at $15.82.

Platinum rose 0.3 percent to $890 an ounce, after touching its lowest since February 2016 last week, while palladium was 0.2 percent higher at $1,008.50.