Bullion also lost value on Monday in the aftermath of the U.S. Federal Reserve chief indicating interest rates are likely to remain low for the near term. Following two days of policy meetings last week, chair Janet Yellen said the body is poised to leave borrowing costs unchanged. They presently are at record lows of 0.25.
As the second quarter draws to a close next week, the precious metal is pushing toward marking its second consecutive quarterly gains. That has not happened in about three years.
Gold advanced "on the back of rising tension in Iraq, dovish remarks by Fed Chair Janet Yellen" and purchases linked with technical issues, states a Monday report authored by analyst Abhishek Chinchalkar with AnandRathi Commodities Ltd. in Mumbai, according to Bloomberg. Chinese demand is "unlikely to pick up any time soon. We expect gold to face strong hurdles in sustaining these recent gains."
Gold futures are coming off their first annual losses in 12 years, a bullish trend that came to a close amid U.S. economy growth. That projected the Fed would cut down on economy-spurring monetary stimulus measures, which reduces the amount of dollars in the market. For that reason, the U.S. dollar advances in value, tugging down gold futures because the two typically perform the inverse of one-another.
In 2013, gold futures plunged roughly 28 percent.
Additional geopolitical strife also is benefiting the price of gold futures these days. Russia and Ukraine have been feuding since early this year, when Ukraine ousted its prime minister. Russian forces then advanced into Ukraine, and pro-Russian separatists have caused unrest in Ukraine as well. That underscores demand for the yellowish metal.
Follow to a strong week
Gold futures are coming off a strong week, and questions regarding demand for bullion are in play as this week begins, Reuters reports.
One bank manager said that the rally is the key issue at this time, which likely over through the remainder of the week.
"After last week's rally, we just have to see whether there is any additional buying left in the trunk, and the level to keep an eye on is at $1,330-1, but it is not unusual to have a little bit of consolidation," senior manager Ole Hansen with Saxo Bank told Reuters on Monday. "In stock markets, we had a new record high last week but we are seeing a bit of a wobble today in Europe and any further weakness could lend further support but not enough to justify another rally."
China and India, the world's two top consumers of the yellowish metal, have been slow to purchase because of rising prices, Reuters reports. Such is the case in other regions of Asia where demand typically is healthy.
'The disintegration of the state of Iraq'
Concerns are rapidly growing about the deteriorating situation in Iraq.
The Washington Post reports official forces of the Middle Eastern nation are in rough shape after having fought with Islamic militants during the past two-plus weeks. On top of demoralizing losses to the militants, Iraqi forces use compromised equipment and are suffering from mass amounts of desertions. The military has lost parcels of land to the militants that it is unlikely to re-capture.
Pressure is mounting on Prime Minister Nouri al-Maliki, whose rulership is shrinking by the day.
"Over time, what's occurred is that the Iraqi army has no ability to defend itself," analyst Rick Brennan with Rand Corp. told The Washington Post. "If we're unable to find ways to make a meaningful difference to the Iraqi army as they fight this, I think what we're looking at is the beginning of the disintegration of the state of Iraq."
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