Investing.com - Gold futures were lower in European trade on Monday, falling for the second straight session as the U.S. dollar recovered from losses suffered in wake of the Federal Reserve’s dovish statement.
The dollar continued to recover from five-month lows as investors closed out bearish bets following an aggressive selloff late last week.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, tacked on 0.2% to 95.27, moving away from Friday’s five-month low of 94.61.
Gold for April delivery on the Comex division of the New York Mercantile Exchange slumped $12.00, or 0.96%, to trade at $1,242.30 a troy ounce by 07:45GMT, or 3:45AM ET. On Friday, gold lost $10.70, or 0.85%.
Despite recent losses, prices of the yellow metal are up nearly 16% so far this year as investors seek safe havens in the face of mounting instability in other financial markets and as fears over a China-led global economic slowdown make it tougher for the Fed to raise rates.
The U.S. central bank surprised markets last week by cutting its rate hike projections more than expected, down from four to two in 2016, citing the potential impact from weaker global growth and financial market turmoil on the U.S. economy.
Investors and economists dialed back their own rate hike expectations in wake of the Fed’s surprisingly dovish outlook, with traders of interest-rate futures now seeing no rate rise before September. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
In the week ahead, market players will be turning their attention to Friday’s final reading on U.S. fourth quarter gross domestic product for fresh indications on the strength of the economy.
Reports on U.S. durable goods orders and home sales will also be in focus, as investors attempt to gauge if the world\'s largest economy is strong enough to withstand further rate hikes in 2016.
Investors will also be paying close attention to a number of speeches from key Fed officials this week, including James Bullard, Dennis Lockhart, Jeffrey Lacker, Charles Evans and Patrick Harker.
Also on the Comex, silver futures for May delivery declined 9.1 cents, or 0.58%, to trade at $15.72 a troy ounce during morning hours in London, while copper futures shed 1.1 cents, or 0.46%, to $2.272 a pound.
A stronger greenback tends to weigh on commodities traded in dollars by making them more expensive for non-U.S. buyers.