Gold prices rebounded off five-year lows on Monday as some investors rushed to grab a bargain while others closed out bets on weaker prices to lock in gains on the recent slide.
The most actively traded gold-futures contract, for February delivery, was recently up $6.10, or 0.6%, at $1,062.20 a troy ounce on the Comex division of the New York Mercantile Exchange.
Prices slid to $1,056.20 an ounce on Friday, the lowest since Feb. 2010, on anticipation that the Federal Reserve will soon raise interest rates. The U.S. central bank is widely expected to tighten monetary policy for the first time since 2006 at its December meeting, ending a historic period of near-zero borrowing costs. Gold is likely to struggle once rates climb as it doesn’t earn interest and costs money to hold.
But prices inched higher on Monday as some traders purchased previously sold gold futures contracts to lock in gains on the pullback. Bearish traders sell futures contracts to bet on weaker prices and must repurchase them to close out those wagers. Gold futures are down 11% in the year through Friday.
Other traders edged back into the market in search of a bargain as gold prices remain close to five-year lows.
Still, gold prices are likely to continue marching lower as investors brace for more stimulus measures from the European Central Bank, which is due to meet on Thursday, said Graham Leighton, a precious metals broker with Marex Spectron in New York.
“It all indicates a stronger dollar and therefore a weaker gold prices,” Mr. Leighton said.
The precious metal is traded in dollars and becomes more expensive for buyers who use other currencies when the dollar strengthens. The ICE Dollar Index, which tracks the dollar against a basket of international currencies, is on track to lock in a 3.4% gain for November and is up about 11% so far this year.
Gold traders are also bracing for U.S. nonfarm payrolls data for November, which will be released on Friday. A stronger employment picture raises the likelihood that the Fed will tighten monetary policy in December and is also seen as boosting the dollar.-WSJ