Gold futures ended Monday's trading below $860 an ounce for the first time in more than a week as a rising U.S. dollar reduced the metal's investment appeal.
Gold for February delivery closed down $21.70, or 2.5%, at $857.80 an ounce on the Comex division of the New York Mercantile Exchange, ending below $860 an ounce for the first time since Dec. 25. It dropped as far as $843.50 earlier.
The dollar rose against its major rivals to start the first full trading week of 2009, with the index (DXY:
, , ) up 1%. Greenback and gold prices tend to move in opposite directions.
"Gold headed lower as the dollar surged," said analysts at Action Economics. Also, "gold prices will remain sensitive to movement in oil."
The greenback rose despite "the lack of an obvious trigger," said Marc Chandler, a currency strategist at Brown Brothers Harriman. The magnitude of the gain was unexpected, he said.
The dollar's upward trend, however, could lose steam depending on Federal Reserve monetary policy, analysts said. The Fed has already lowered the benchmark rate to a range between 0.5% to zero percent.
Charles Evans, president of the Federal Reserve Bank of Chicago, said over the weekend that based on the outlook for rising unemployment, falling industrial production and a wider output gap, economic models suggest rates should be below zero, according to Reuters reports.
In energy trading, crude futures erased earlier losses to rise more than 2%. See Futures Movers.
March copper fell slightly to end at $1.459 a pound, April platinum rose 1.2% to $957.60 an ounce and March palladium fell 3.8% to $184.95 an ounce. Silver for March delivery dropped 1.9% to $11.29 an ounce.
In gold spot trading, the London gold-fixing price -- a benchmark for gold traded directly between big institutions -- stood at $853.50 an ounce, down $21 from Friday afternoon.
Holdings in the SPDR Gold Trust, the largest exchange-traded gold fund, stood at 780.23 tons Friday, unchanged from a day ago and up 22.11 tons from a month ago, according to the latest data from the fund. The SPDR Gold Trust fell 2% to $84.51.
The Amex Gold Bugs Index , which tracks the share prices of major gold companies, fell 2.4% to 291.89.
The iShares Gold Trust exchange-traded fund fell 2% to $84.60, while the iShares Silver Trust ETF dropped 2.5% to $11.13.
The Market Vectors-Gold Miners ETF slipped 2.9% to $32.38.
