Gold futures are modestly lower early Thursday in reaction to a stronger U.S. dollar and expectations that China might tighten monetary policy.
Around 9:30 a.m. EST (1430 GMT), lightly traded but nearby January gold was down $4.70 to $1,131.20 an ounce on the Comex division of the New York Mercantile Exchange, while most-active February gold fell $3 to $1,13350.
Most-active March silver was nearly steady, gaining a cent to $18.185.
"A higher dollar is weighing on commodities," said Charles Nedoss, senior market strategists with Olympus Futures. "No. 2, you're starting to hear some talk about China reining in lending."
Investors often buy gold as a hedge against dollar weakness and conversely sell when the greenback rises. Also, a rise in the dollar makes commodities generally more expensive in other currencies, thus can hurt demand. The ICE Futures U.S. March dollar index is up 0.395 point to 78.050.
This has led to some profit-taking in gold and other commodities, in which traders who bought at lower prices are now selling to exit the market.
Early in the day, the dollar rose after Japan's finance minister said he wants to see a softer Japanese yen. Also, China's central bank sold its benchmark three-month bills at 1.3684% overnight, the first increase from a yield of 1.3280% since Aug. 13, signaling a slight shift in policy focus toward pre-empting inflation risks.
George Gero, vice president with RBC Capital Markets Global Futures, said some traders may be selling to exit positions ahead of Friday's key monthly U.S. jobs report.
-By Allen Sykora, Dow Jones Newswires; 541-318-8765; allen.sykora@dowjones.com
