Dollar strength pushes gold away from two-week high

Bengaluru — Gold inched down on Tuesday from a two-week high hit in the previous session, as the dollar firmed against yuan, making the precious metal expensive for buyers in the world’s biggest consumer, China.

China’s central bank raised its daily guidance rate for the yuan by the most in nearly 15 months on Tuesday, sparking a demand for dollars.

Spot gold fell 0.2% to $1,209.04/oz at 3.58am GMT, after hitting its highest since August 13 at $1,212.38 on Monday.

US gold futures were down 0.1% at $1,215.40/oz.

“The downtrend on the dollar has reversed, with markets probably concerned over the [currency] fixing in China. The market is still a little bit nervous overall when it comes to buying into the weaker US dollar narrative,” said Stephen Innes, Asia-Pacific trading head at Oanda in Singapore.

The dollar index inched up 0.1% against a basket of six major currencies on Tuesday, after falling to a more than three-week low.

Gold has lost its appeal as a safe-haven asset, having fallen more than 7% so far in 2018, amid international trade disputes and the Turkish currency crisis, with investors increasingly turning to the US dollar instead.

The yellow metal, however, has recovered after touching one-and-a-half-year lows on August 16 at $1,159.60 as the dollar’s run slowed after President Donald Trump criticised the US Federal Reserve for raising interest rates at a time when the government was trying to stimulate the economy.

“We need a complete flip around momentum in the US dollar for gold to push above $1,230 and move to $1,260. Unless the Fed takes the December rate hike off the table, gold does not have a chance to get near any of those supportive levels,” Innes said.

Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.

Spot gold may rise to $1,224/oz, as it has broken a resistance at $1,209/oz, said Reuters technical analyst Wang Tao.

Spot silver was down 0.3% at $14.81, after hitting its highest since August 15 at $14.92 on Monday.

Platinum was up 0.4% at $802.74, after touching a two-week high at $807.60.

Palladium fell 0.1% to $947.75. At $950.25, prices matched one-and-a-half-month highs hit on Monday.

Reuters