Gold holds steady as Fed rate pause bets weigh on dollar

U.S. Dollar

On Friday, Powell told the American Economic Association that the Fed is not on a preset path of interest rate hikes and that it will be sensitive to the downside risks markets are pricing in.

The pan-continental Stoxx Europe 600 fell 0.1% in opening trade.

Gold prices are higher Monday morning, lifted by a weaker US dollar ahead of release of the minutes of the Federal Reserve's monetary policy meeting in December.

"The Fed is listening to the market and has acknowledged flashing market signs", said Sim Moh Siong, currency strategist at Bank of Singapore. The Australian dollar extended gains of almost 0.4 percent against the greenback.

The euro and the Australian dollar led gainers with the latter also benefiting from the weekend news of growing policy stimulus in China.

Despite Friday's stronger than expected U.S. December jobs data, many analysts believe the world's largest economy is losing momentum and further rate hikes are the last thing it needs.

Later that day, Fed boss Jerome Powell said the bank had no "pre-set" plan for raising borrowing costs and was keeping a close watch on financial developments.

"The market is reconsidering its expectations for Fed rate hikes and as the expectations have been scaled back gold prices have been able to edge higher", said Suki Cooper, precious metals analyst at Standard Chartered Bank.

US 2-year and 10-year Treasury yields fell sharply over the last couple of weeks indicating that bond traders see little chance of the Fed raising rates this year on the increased likelihood of a growth slowdown in the world's largest economy. Bostic, who is not a voting member of the Federal Open market Committee this year, said the Fed may only need to raise rates once in 2019.

Expectations of no further rate hikes this year is likely to keep the greenback under pressure.

In currency markets, the dollar index .DXY , which tracks the greenback versus the euro, yen, sterling and three other currencies, was down 0.49 percent at 95.709 amid the diminished expectations for further USA rate hikes.

In commodities, Brent crude advanced 1.9% to $58.14 a barrel. It rallied 2.1% Friday ahead of a well-flagged move by the People's Bank of China to add a net 800 billion yuan ($116.48 billion) of liquidity into the banking system by cutting banks' reserve requirements.

Goldman Sachs researchers expect a bounce in equity markets in 2019.

USA futures climbed, signaling Friday's rally in US stocks could continue, and European futures also rose.

US gold futures gained 0.3 percent to $1,289.40 per ounce.

The two sides have until March 1 to make a deal, after which Trump has pledged to ramp up tariffs to 25 percent, from 10 percent, on $200 billion worth of Chinese imports.

Shanghai blue chips rose 0.3 percent, having already climbed over 2 percent on Friday.

The effect was apparent in the Australian dollar, which is often used as a liquid proxy for emerging markets and China risk.

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