Gold prices higher in Asia with physical demand eyed, Fed ahead

Investing.com - Gold prices ticked up in early Asia on Monday as investors looked at physical demand prospects though dollar strength continues to weigh on the commodity.

On the Comex division of the New York Mercantile Exchange, gold futures for April delivery rose 0.25% to $1,155.30 a troy ounce.

Elsewhere on the Comex, silver futures for May delivery gained 0.47% to $15.567 a troy ounce.

Meanwhile, copper for May delivery fell 0.46% to $2.659 a pound despite recent Chinese economic data that has fuelled speculation policymakers in Beijing will have to introduce further stimulus measures to boost growth and ward off deflation.

The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.

Last week, Gold edged modestly higher on Friday, but prices remained near the lowest level in more than three months as the U.S. dollar rallied amid growing expectations for higher interest rates in the U.S.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, jumped 1.2% on Friday to end at 100.32, after touching an intraday high of 100.39, the most since April 2003.

A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.

The euro fell below the $1.05-level against the greenback for the first time in 12 years, pressured lower by the diverging monetary policy stance between the Federal Reserve and the European Central Bank.

The euro has depreciated more than 10% against its U.S. counterpart for the year and nearly 40% since August as the ECB launched a €60 billion a month quantitative easing program earlier in March.

Demand for the dollar continued to be underpinned after stronger-than-forecast nonfarm payrolls report for February released earlier in the month solidified expectations for higher interest rates.

The Fed is expected to begin raising interest rates around the middle of this year and investors were looking ahead to next week’s policy statement to see if it would drop its reference to being "patient" before raising rates.

Expectations of higher borrowing rates going forward is considered bearish for gold, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise.

In the week ahead, market players will focus on the conclusion of the Federal Reserve's two-day monetary policy meeting on Wednesday, which could provide indications on how soon it might raise interest rates.

If the Fed decides to remove a reference to "remaining patient," in its statement, it typically indicates that interest rates could be raised at either of its next two meetings. After next week's meeting, the FOMC will meet in June and September.

On Monday, the U.S. is to produce reports on industrial production and manufacturing activity in the New York region, as well as private sector data on the housing market.