Firmer dollar weighs on gold

Bengaluru — Gold prices eased on Thursday as the US dollar hovered near multi-week highs, while some investors locked in profits ahead of major central bank meetings in the next week.

The European Central Bank (ECB) is meeting later in the day, followed by the US Federal Reserve on Tuesday and Wednesday.

Spot gold was down 0.2% at $1,422.80/oz, as of 3.03am GMT. US gold futures were down 0.1% at $1,422.90.

“From the last three days, gold prices have been range-bound. Some money managers are starting to shut some positions to prepare for the Fed meeting, and also the ECB decision coming out today,” said Phillip Futures analyst Benjamin Lu.

“Before the key events happen, people like to take in some profits because nobody knows what is going to happen. Some might capitalise on volatility to push prices slightly lower and buy back after the dip. Overall, on the long term we are still bullish on gold,” Lu added.

Weighing down gold prices, the US dollar edged near a two-month high against a basket of major currencies on Thursday. A stronger dollar makes gold costlier for holders of other currencies.

Investor focus shifted to the ECB meeting due later on Thursday and a widely expected interest-rate cut from the Fed next week, which are expected to dictate the tempo for currencies and bond yields in coming months.

Lower US interest rates put pressure on the dollar and bond yields, increasing the appeal of non-yielding bullion.

Further boosting hopes of lower interest rates, a series of purchasing manager index (PMI) readings in the US and Europe on Wednesday came in weaker than expected.

In the US, data showed manufacturing activity slowed to a 10-year low in early July, with production volumes and purchases falling.

Gold prices have climbed more than 12% or $150, since touching a 2019 low of $1,265.85 in early May, driven by dovish outlook from major central banks, signs of the US economy losing steam and an escalation in tensions the Middle East.

“The gold rally will be vulnerable to the rhetoric of central banks, as their actions have for the most part been priced into the asset,” Alfonso Esparza, a senior market analyst at Oanda, said in a note.

Meanwhile, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, dropped 0.11% to 822.25 tons on Wednesday from Tuesday.

Spot gold remains neutral in a narrow range of $1,412-$1,427/oz, according to Reuters technical analyst Wang Tao. Silver dropped 0.6% to $16.49/oz, after hitting over a one-year high of $16.64 in the previous session.

Platinum rose 0.3% to $878.21/oz, its highest since May 7, while palladium edged up 0.1% to $1,541.07, after touching a one-week high earlier in the session. 

Reuters

Source: businesslive.co.za