Investing.com – Gold prices rose in Asian trading on Thursday due to a slight weakness in the dollar as markets returned to trading after the Christmas holiday, while gains were limited as investors remained cautious after the US Federal Reserve's hawkish bias.
Traders also refrained from placing large bets during the holiday-shortened week, resulting in lower trading volumes.
Securities futures rose 0.4% to $2,627.55 an ounce, while February trading futures rose 0.1% to $2,643.86 an ounce by 00:00 ET (05:00 GMT).
Geopolitical tensions in the Middle East also contributed to bullion's gains.
The Palestinian Hamas movement and Israel accused each other on Wednesday of obstructing a ceasefire agreement, with Hamas blaming Israel for imposing additional conditions and Israeli Prime Minister Benjamin Netanyahu claiming that Hamas had reneged on previous understandings.
Gold is seen as a safe-haven asset amid market uncertainty.
The US dollar is weakening but remains near a two-year high
The index fell slightly in Asian trading on Thursday, but remained hovering near the highest level in two years that it touched last week.
The Fed's hawkish turn last week has led to renewed strength in the dollar, as higher interest rates make the US currency more attractive due to increased returns on dollar-denominated assets.
A stronger dollar often affects gold prices because it makes the yellow metal more expensive for buyers using other currencies.
Gold prices fell sharply last week after the Federal Reserve's monetary policy meeting indicated that interest rates would remain high for longer.
Higher interest rates put downward pressure on gold, as the opportunity cost of holding gold increases, making it more attractive compared to interest-bearing assets such as bonds.
The yellow metal witnessed marginal movements this week, after losing more than 1% in the previous week, which reflects the uncertainty about the future of the metal.
Other precious currencies were largely stable on Thursday. Futures prices were unchanged at $960.20 per ounce, while remaining at $30.273 per ounce.
Copper rises thanks to Chinese stimulus, and a strong dollar limits its gains
Among industrial metals, prices rose after a Reuters report showed that Chinese authorities plan to issue a record 3 trillion yuan ($411 billion) worth of special treasury bonds next year, in an intense financial effort to stimulate the faltering economy.
The red metal failed to take full advantage of this news, as the strong dollar weighed in.
Analysts also attributed copper's weakness to the seasonal slowdown as industrial production and construction projects often slow down as companies and projects prepare for year-end closures and holidays.
The most actively traded January copper contract on the Shanghai Futures Exchange (SHFE) rose 0.2% to 74,220 yuan per ton.
Benchmark copper contracts on the London Metal Exchange were closed on Thursday for the holiday.
