US gold futures slipped 0.3 percent on Monday at $1,318.80 an ounce. "January is usually a good month for gold prices and should remain so on the anticipation of physical demand ahead of the Chinese New Year," said Stephen Innes, APAC head of trading, Oanda.
"While there could be some downside pressure from a possible US dollar correction, gold will likely remain firm until a March Fed hike possibility comes on the radar," Innes said. Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
Meanwhile, hedge funds and money managers raised their net long positions in COMEX gold in the week to January 2, US Commodity Futures Trading Commission (CFTC) data showed on Friday. Spot gold may edge up to a resistance at $1,329 per ounce and then start a correction, as suggested by a Fibonacci retracement analysis, according to Reuters technical analyst Wang Tao.
The Chinese New Year demand is yet to pick up as the prices are too hard to swallow," a Singapore-based trader said. "Prices should see $1,340 (in the near term) and if it does not breach that gold should look to ease back below $1,300." Physical gold demand across Asia remained subdued last week as prices rallied to a three-and-a-half-month high, keeping retail buyers away from the market.