Gold inched up on Monday bolstered by a jump in oil prices and safe-haven bids from rising geopolitical tensions in the Middle East.
Saudi Arabia cut ties with Iran on Sunday responding to the storming of its embassy in Tehran in an escalating row between the rival Middle East powers over Riyadh's execution of a Shiite Muslim cleric.
Higher oil prices support bullion as gold is often seen as a hedge against oil-led inflation. Safe-haven bids could also be buoying gold as the metal is seen as an alternative investment during times of geopolitical and financial uncertainties.
Those factors offset any selloff from a stronger greenback. The dollar hovered near a two-week high against a basket of currencies on Monday in the first trading session of 2016. After losing 10 percent last year gold faces another tough year in 2016 amidst higher U.S. interest rates and a stronger dollar. The Federal Reserve raised U.S. rates for the first time in December and is expected to resort to gradual increases in this year.
Higher rates dent demand for non-interest-paying gold while supporting the dollar. In a reflection of bearish investor sentiment assets of SPDR Gold Trust GLD the top gold-backed exchange-traded fund fell 0.18 percent to 642.37 tonnes on Thursday close to a seven-year low.
Published by HT Syndication with permission from Commodity Online.
