Gold. Picture: REUTERS
Gold. Picture: REUTERS

Bengaluru — Gold held on to a small loss from the previous session on Monday, as the dollar firmed amid expectations of a US Federal Reserve interest rate hike in September and fear of escalating trade tension between the US and China.

Spot gold was down 0.1% at $1,194.61 at 2.25am GMT, having fallen 0.4% in the previous session.

US gold futures were almost flat at $1,200.30 an ounce.

"The strong US nonfarm payrolls led to some modest downward pressure on gold…. Going forward though, the dollar will continue to weigh on gold, and as long as the dollar is strong, gold will remain constrained," said John Sharma, an economist at National Australia Bank.

Stronger than expected US payrolls data on Friday cemented expectations that the US Fed will raise interest rates in September, in what would be its third increase this year.

The dollar firmed against a basket of major currencies on Monday thanks to the jobs data and after US President Donald Trump warned tariffs on a further $267bn worth of Chinese imports, on top of earlier promises to levy duties on $200bn worth of Chinese goods.

"It appears that the US will be able to weather the impact of the trade war for the time being, but the question is how long. With the imposition of tariffs, US exports will be negatively impacted as well," Sharma said.

Gold has fallen more than 8% this year as concern about trade disputes, currency weakness in emerging markets and rising US interest rates has strengthened the dollar, making bullion more expensive for buyers with other currencies.

"The markets continue to look for that golden lining. But the primary issue is (safe) haven demand remains fleeting in the presence of the stronger dollar narrative," said Stephen Innes, Asia-Pacific trading head at Oanda.

Investors increased their bearish stances in Comex gold and silver contracts to the biggest on record in the holiday-shortened week to September 4, data showed.

Holdings of gold by exchange traded funds have fallen by more than 4-million ounces since touching a peak in late April.

While gold bulls are buying whenever there is a pull-back to the low $1,190s, the general malaise for commodities, coupled with the stronger dollar, suggest sellers are emerging on the rallies, Innes said.

Among other precious metals, spot silver was up 0.1% at $14.11.

Platinum rose 0.3% to $781.30, while palladium fell 0.4% to $976.97, after hitting a high of more than 11 weeks on Friday at $990.