Gold scales 5-month peak as dollar dips on China reopening hopes

By Ashitha Shivaprasad

(Reuters) - Gold prices hit a five-month high on Monday, as the dollar edged lower after more Chinese cities relaxed COVID-19 restrictions over the weekend.

Spot gold rose 0.6% to $1,809.04 per ounce by 0452 GMT, after touching its highest level since July 5 at $1,809.91 earlier. U.S. gold futures gained 0.7 to $1,821.70.

The dollar index was down 0.4% at a more than five-month low. A weaker dollar makes greenback-priced bullion cheaper for overseas buyers.

"The market still expects the Fed (Federal Reserve) to slow their pace of tightening, which is providing support to gold," said City Index analyst Matt Simpson, referring to the strong jobs data.

Data released on Friday showed U.S. employers hired more workers than expected in November and increased wages, shrugging off mounting worries of a recession, but that will probably not stop the Fed from slowing the pace of its interest rate hikes starting this month.

Market participants see a 91% chance of a 50-basis point rate hike at the Fed's meeting this month.

Lower interest rates tend to be beneficial for gold as it reduces the opportunity cost of holding the non-yielding asset.

"Also, news that China is scaling back its COVID restrictions means that gold demand will increase in the region, further supporting prices," said Simpson.

More cities in top gold consumer China announced an easing of coronavirus curbs on Sunday, as the country tries to make its zero-COVID policy more targeted and less onerous after unprecedented protests.

The London Bullion Market Association is creating a database of Russian gold bars held by banks in London to help prevent sanctions evasion by Russian companies or the Russian central bank, the industry group said on Friday.

Spot silver rose 0.6% to $23.27 per ounce, platinum gained 1.1% to $1,025.50, and palladium climbed 0.9% to $1,917.29.

(Reporting by Ashitha Shivaprasad, Arundhati Sarkar in Bengaluru; Editing by Uttaresh.V, Subhranshu Sahu and Rashmi Aich)