Gold close to two-week low as dollar takes the limelight

Bengaluru — Gold steadied on Monday, trading near a two-week low hit in the previous session, as strong US economic data underpinned the dollar amid geopolitical as well as trade tensions.

Spot gold was broadly unchanged at $1,276.79/oz at 3.21am GMT.

US gold futures were 0.1% higher at $1,276.40/oz.

The metal fell to a two-week low of $1,274.51/oz on Friday after data showed US consumer sentiment jumped to a 15-year high in early May amid growing confidence over the economy’s outlook.

“The safe-haven demand of the US dollar is taking some of the gloss off gold’s safety,” said Michael McCarthy, chief market strategist, CMC Markets.

“It is a tough time all around for gold with the break below $1,290 also pressuring it. In the absence of safe-haven demand I would expect to see ongoing modest pressure on gold prices.”

Rekindled China-US trade tensions have seen the dollar mimicking its characteristics from 2018 when it was preferred over gold as a safe-haven hedge.

The dollar index booked its biggest weekly rise since early March last week.

Market participants were left concerned after Google confirmed a Reuters report stating that it suspended some business with Chinese tech giant Huawei, which has been a sticking point in the trade relations between the US and China.

In the Middle East, Iran was served a new warning by Trump who tweeted that if the country wanted to fight, that would be its “official end”.

The heightened rhetoric follows last week’s attacks on Saudi oil assets and the firing of a rocket on Sunday into Baghdad’s heavily fortified “Green Zone” that exploded near the US embassy.

“For gold, $1,265 is now a critical support that must hold. A daily close below that region implies a much deeper correction could be imminent,” Oanda analyst Jeffrey Halley said in a note.

Meanwhile, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.4% to 736.17 tons on Friday.

Hedge funds and money managers also raised their net long positions in Comex gold in the week to May 14, the US Commodity Futures Trading Commission (CFTC) said on Friday.

“We suspect some of these new longs must have gotten shredded over the past two sessions,” INTL FCStone analyst Edward Meir said in a note.

Among other precious metals, silver was up 0.3% to $14.43/oz, having registered a more than five-month low at $14.35 in the previous session.

Platinum gained 1% to $821.85, having fallen to $812.50, its lowest since March 11, in the previous session. Palladium rose 0.3% to $1,314. The metal used in catalytic converters in car exhaust systems has shed about 19% since scaling a record peak of $1,620.53 in March.