Gold futures hold near 3-year lows as stronger dollar weighs

Gold futures were under pressure on Monday, holding near the lowest level since September 2010 as the U.S. dollar was boosted amid expectations the Federal Reserve will begin to taper off its bond-buying program by the end of this year.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at USD1,283.05 a troy ounce during European morning hours, down 0.7% on the day.

Comex gold prices fell by as much as 1.1% earlier in the session to hit a daily low of USD1,277.65 a troy ounce.

Gold future prices plunged to USD1,268.75 a troy ounce on Friday, the weakest level since September 16, 2010.

Gold futures were likely to find support at USD1,246.20 a troy ounce, the low from September 14, 2010 and near-term resistance at USD1,310.10, the high from September 28, 2010.

Comex gold lost 6.8% last week, the worst weekly decline since September 2011, after Fed Chairman Ben Bernanke said last Wednesday that the bank could begin tapering asset purchases by the end of 2013 if the economy continues to pick up.

Moves in the gold price this year have largely tracked shifting expectations as to whether the U.S. central bank would end its bond-buying program sooner-than-expected.

An exit from the stimulus would deal a heavy blow to gold, which has thrived on demand from investors who buy gold to hedge against the inflationary risks of loose monetary policies. 

Indications the Fed will begin to taper asset purchases sent the U.S. dollar higher across the board. 

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.2% to trade at 82.80, the strongest level since June 4.

A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.

Elsewhere on the Comex, silver for September delivery tumbled 1.75% to trade at USD19.65 a troy ounce, while copper for September delivery plunged 2.6% to trade at USD3.020 a pound, the weakest level since July 2010.

Copper prices came under heavy selling pressure amid concerns about a cash crunch in the Chinese financial system and slowing global economic growth.

Wall Street lender Goldman Sachs slashed its estimate for Chinese gross domestic product in 2013 to 7.4% percent from 7.8%, citing weaker economic indicators and tightening of financial conditions

China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.