Gold holds steady as Fed rate pause bets weigh on dollar

The Dow rallied following Fed Chairman Jerome Powell’s comment that there was no “preset path” toward raising interest rates

The decline in dollar comes after Powell, on Friday, told the American Economic Association that the Fed is not on a preset path of interest rate hikes and that it will be sensitive to the downside risks the markets are pricing in.

Gold benefited from the diminished risk of US rate hikes and rose half a percent to $1,291.12, just off a six-month high.

"Market sentiment has improved", said Gao Qi, a strategist at Scotiabank. The Australian dollar extended gains of almost 0.4 percent against the greenback.

Stocks across Asia kicked off the week with strong gains after soothing Federal Reserve comments and an easing of monetary policy in China stoked a renewed appetite for risk assets.

Asian markets rallied Monday after a blockbuster performance on Wall Street as USA jobs data beat forecasts and the head of the Federal Reserve hinted at a slower pace of interest rate hikes.

Later that day, Fed boss Jerome Powell said the bank had no "pre-set" plan for raising borrowing costs and was keeping a close watch on financial developments.

The Federal Reserve may only need to raise interest rates once in 2019, Atlanta Fed President Raphael Bostic said on Monday, focusing on business executives' nervousness about the economy and a global slowdown as factors that may hold the United States central bank back. The boost to stock markets saw them recapture all the year's losses and push into positive territory for 2019 so far, with Wall St's main indices closing up more than 3 percent by the close on Friday.

"Last Friday's strong USA jobs data suggested that recession fears were overblown", said Philip Wee, currency strategist at DBS in a note.

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The news was music to the ears of traders, who have been fretting that the Fed would press on with its rate hike cycle, making it more expensive to borrow for investment.

Expectations of no further rate hikes this year is likely to keep the greenback under pressure.

Palladium, meanwhile, slipped 0.6 percent to $1,292.90 an ounce after touching a record high of $1,313.24 earlier in the session.

Chinese stocks firmed after the country's central bank announced an easing in policy on Friday, with 100 basis points of cuts to bank reserve requirements freeing up around $116 billion for new lending.

Goldman Sachs researchers expect a bounce in equity markets in 2019. At the Multi Commodity Exchange or MCX, gold futures prices for delivery in February this year were down Rs 38 or 0.12% to Rs 31,610 per 10 grams in a business turnover of 1,568 lots. The single currency has gained around 1.5 per cent over the last three trading sessions as the outlook towards the greenback worsened.

On Friday, U.S. non-farm payrolls data showed the world's largest economy added 312,000 net new jobs in December, while wages rose at a brisk annual pace of 3.2 percent, both way above expectations. South Korea's Kospi climbed 1.3%, Australia's S&P/ASX 200 benchmark rose 1.1% and Hong Kong's Hang Seng Index rose 0.8%.

Sterling rose 0.12 percent versus the dollar at $1.2742.

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