Gold hovered near its lowest in three months on Tuesday after sharp overnight losses as the dollar traded at 14-month highs against a basket of major currencies, dimming the metal’s appeal as a currency hedge.
Spot gold had slipped slightly to $1,254.66 an ounce by 0335 GMT. The metal closed down 1 percent on Monday, after earlier hitting $1,251.24 – its lowest since June. “Gold appears to be testing its $1,250 an ounce support handle, and any break below may see the precious metal extend its bearish trend,” said OCBC Bank analyst Barnabas Gan.
The path of least resistance for gold is to move lower as the U.S. dollar is expected to strengthen further, other traders said. The dollar index was near July 2013 highs, boosted by a San Francisco Fed study that noted investors are pricing in a lower trajectory for interest rates rises than members of the central bank are.