Gold bars are seen at the Kazakhstan's National Bank vault in Almaty, Kazakhstan. File photo: REUTERS/MARIYA GORDEYEVA
Gold bars are seen at the Kazakhstan's National Bank vault in Almaty, Kazakhstan. File photo: REUTERS/MARIYA GORDEYEVA

Bengaluru — Gold prices rose on Monday as investors covered their short positions and the dollar slipped to its weakest since mid-June, while lingering US-China trade tension supported the bullion as well.

Spot gold was 0.4% higher at $1,258.61/oz, as of 3.51am GMT, while US gold futures for August delivery were up 0.3% at $1,259.90/oz.

Gold is pushing higher on the dollar’s weakness in early Asian trading, MKS PAMP Group trader Tim Brown wrote in a note.

The dollar index, which measures the greenback against a basket of six major currencies, slipped to a three-and-a-half-week low after US jobs data showed slower than expected wage growth.

The US economy created more jobs than expected in June, but steady wage gains pointed to moderate inflation pressures that should keep the Federal Reserve on a path of gradual interest rate increases this year. A weak US dollar makes greenback-denominated gold cheaper for holders of other currencies.

"Some short-covering has likely ensued given certainties over the US-China trade tensions on Friday. Still, the uptick in risk appetite into the week may be short-lived if more trade tariff threats are seen into the week ahead," said OCBC analyst Barnabas Gan.

The US and China exchanged the first salvos in what could become a protracted trade war on Friday, slapping tariffs on $34bn worth of each others’ goods and giving no sign of willingness to start talks aimed at a reaching a truce.

President Donald Trump said on Thursday the US may ultimately impose tariffs on more than a half-trillion dollars’ worth of Chinese goods. "With the ongoing US-China trade tensions, the resignation of David Davis will likely be a side-show, though it may raise some concerns amongst market-watchers depending on how the overall Brexit issue progresses," Gan added.

Brexit Secretary Davis resigned because he was not willing to be "a reluctant conscript" to Prime Minister Theresa May’s plans to leave the EU, delivering a blow to a British leader struggling to end divisions among her ministers.

Spot gold might rise into a range of $1,268/oz-$1,277/oz, as it had cleared a resistance at $1,257, Reuters technicals analyst Wang Tao said.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.15% to 802.24 tonnes on Friday.

Among other precious metals, silver rose 0.7% at $16.11/oz.

Platinum gained 1.2% to $850.15/oz and palladium was 0.4% higher at $957/oz.