Firmer dollar takes the shine off gold

Bengaluru — Gold prices dipped on Monday due to a stronger US dollar and a recovery in equities, as major central banks globally hinted at more stimulus, easing fears about a sharp economic downturn.

Spot gold was down 0.3% at $1,509.13 per ounce in early-morning trading.

US gold futures also fell 0.3% to $1,518.70 an ounce.

“The dollar is getting stronger, and given that gold had a very good rally over the last few weeks, we are just seeing some profit-taking…,” said Oanda analyst Jeffrey Halley, adding that the recovery in equities is somewhat fragile and gold looks constructive.

The dollar index, against a basket of six major currencies, hovered near a two-week high reached on Friday, making greenback-denominated gold costlier for investors holding other currencies.

The 10-year US Treasury yield pulled away from a three-year trough hit last week.

Asian stocks also rose on Monday as hopes of more stimulus from central banks around the world and steps being taken by major economies such as Germany and China soothed investors’ fears of global economic slump.

China’s central bank unveiled a key interest rate reform on Saturday to help drive borrowing costs lower for companies, and support a slowing economy, which has been impeded by the trade war with the US.

Spot gold has gained 19% so far since falling to the year’s low of $1,265.85 in May, boosted by rising risk aversion due to Sino-US trade tensions and monetary easing by central banks.

“There is still plenty of interest to buy gold on any dips as a hedge against uncertainty in the global economy,” Halley said.

“Gold will be supported on any dips between $1,500 and $1,510 an ounce,” he said.

Investors are now awaiting the Federal Reserve’s Jackson Hole symposium this week to get greater clarity on the future path of interest rates. Traders see about a 74% chance of a 25 basis-point cut in September.

“The precious metal though easing up on bullish gains from US dollar vigour will remain supported over subdued global growth and accommodative monetary policy by global central banks,” Phillip Futures analyst Benjamin Lu said in a note.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.10% to 843.41 tons on Friday.

Hedge funds and money managers trimmed their bullish stance in Comex gold and cut net long positions in silver contracts in the week to August 13, the US Commodity Futures Trading Commission (CFTC) said on Friday.

Silver eased 0.2% to $17.04 per ounce.

Platinum rose 0.5% to $848.49 an ounce, and palladium climbed 0.2% to $1,451.14 an ounce.

Reuters