Dollar weakness helps gold edge higher

London — Gold edged higher on Tuesday, helped by weakness in the dollar after a trade deal was struck between the US and Mexico but analysts said ongoing US-China tensions would continue to weigh.

The US and Mexico agreed on Monday to overhaul the North American Free Trade Agreement (Nafta).

The dollar was pinned at its lowest in nearly a month against a basket of major currencies, while riskier assets such as equities rose. A weaker US currency generally boosts demand for dollar-denominated commodities.

“The main trade dispute, meaning US-China conflict, is still going on so this Nafta deal is just a small aspect,” said Commerzbank analyst Daniel Briesemann. He said the effects on gold markets would be limited.

Spot gold rose 0.2% to $1,213.11/oz by 11.15am GMT after snapping a six-day losing streak in the previous session and touching a two-week high.

US gold futures for delivery in December were up 0.3% at $1,219.10.

The deal between the US and Mexico pushed the dollar lower against a basket of major currencies as investors sought riskier assets and the greenback’s safe-haven appeal declined.

In recent months investors have sought safety from the trade disputes in US treasury bonds, which entails buying dollars.

Meanwhile, holdings of the largest gold-backed exchange-traded fund (ETF), New York’s SPDR Gold Trust, have firmed slightly after this month’s drop to their lowest since January 2017 but are still down about 11% since late April.

Net short positions in Comex gold contracts increased for a sixth consecutive week to a new record.

“What will be important is whether we will we see a short squeeze, which could push gold higher,” said Briesemann.

Spot silver was up 0.6% at $14.94 while platinum rose 1.2% to $808.60 after touching a two-week high of $808.70.

Palladium was steady at $948, having touched $950.25 to match the one-and-a-half-month high hit on Monday.

The Nafta deal, which includes new rules for the car industry, lifted platinum and palladium because of their use in autocatalysts. But analysts say the fundamental effect of the deal should be limited.

“Although Mexico is an important manufacturing hub for the US car industry, the deal does not change our outlook for the US car market,” said Julius Baer commodities research analyst Carsten Menke.

Reuters