Gold dropped in thin trade on Monday as early bargain hunting faded, with investors closely
watching movements of the dollar against other currencies ahead of potentially market-moving U.S. data.
Gold has gained above the psychologically important $1,100 an ounce level but it could face a stiff resistance at a 6-½ week high around $1,144 hit in early March if the dollar regains strength.
Spot gold [XAU= 1124.25 -0.25 (-0.02%) ]was at $1,123.60 an ounce by 0315 GMT, down 90 cents from New York's notional close on Friday. It had hit an intraday high of $1,126.70 an ounce on firmer euro -- not far from a two-week high $1,127.75 seen on April 1.
Dealers awaited the release of an ISM survey on the U.S. services sector for March later on Monday, and a policy meeting by the Reserve Bank of Australia on Tuesday, when it is expected to raise rates by 25 basis points to 4.25%.
"We are likely to see a further strengthening of the dollar ahead," said Wong Eng Soon, an investment analyst at Phillip Futures in Singapore, referring to recent economic data such as non-farm payrolls that supported the dollar.
"All tightening measures, whether they come from Australia or China, have the effect of lower commodity prices. I am looking at the topside resistance at $1,140 and a very firm support at $1,110. Gold has more downside risk."
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust [GLD 110.26 1.31 (+1.2%) ], said its holdings stood at 1,129.823 tons as of April 1, unchanged from the previous business day.
U.S. gold futures for June delivery barely moved at $1,125.8 ounce. The New York market reopens on Monday after the Easter holiday.
Markets in Hong Kong and Australia are closed for a holiday. The euro rose to $1.3523 from $1.3476 at midday trading hours in the U.S. on Friday when it fell about 0.7%. A firmer euro lifted the gold price to an intraday high around $1,126 before the buying eventually subsided.
A solid rise in private-sector hiring in the U.S. jobs report has led traders to believe the Federal Reserve may raise the discount rate again on Monday when it holds a meeting, providing support to the dollar.
But some analysts downplayed the significance of the upcoming Fed board meeting since it is held every other Monday and is not the closely watched Federal Open Market Committee meeting.
Japan's Nikkei average hit a fresh 18-month high on Monday after U.S. employers created jobs in March at the fastest rate in three years, the strongest signal yet that the U.S. recovery is on a solid footing.
