Gold eases on hope for Trump-Kim summit and expected US rate hike

Bengaluru — Gold prices eased on Tuesday, as the dollar strengthened amid encouraging signs from a historic US-North Korea summit and a likely interest rate increase by the US Federal Reserve.

That limited demand for gold.

Spot gold inched down 0.2% to $1,297.42 an ounce at 3.52am GMT and US gold futures for August delivery were 0.1% lower at $1,301.50/oz.

“Dollar has been a big driver for some time now and investors are certainly taking more from that than from easing geopolitical risks in recent runs … I suspect that will be the key driver for the short term,” ANZ analyst Daniel Hynes said.

The dollar edged up to a three-week high against the yen on Tuesday, bolstered by optimism about a closely watched US-North Korea summit and widely expected US interest rate increase from the Federal Reserve.

The Federal Open Market Committee (FOMC) starts its two-day meeting later in the day.

“We are all waiting for the Fed meeting, the FOMC should be more of the focus for the market,” said Mark To, head of research at Hong Kong’s Wing Fung Financial Group.

Higher interest rates will likely have an effect on gold prices as they tend to boost the dollar and pressure greenback-denominated commodities, like gold.

Meanwhile, a historic summit between US President Donald Trump and North Korean leader Kim Jong-un got under way in Singapore, over how to end a nuclear standoff on the Korean peninsula.

Hynes said the risk environment was probably better leading up to the summit in Singapore. “The market is starting to price in slightly less geopolitical risks.”

The European Central Bank and Bank of Japan also have policy meetings this week.

Gold is expected to be volatile this week amid the US-North Korea summit and central bank meetings from Wednesday to Friday, MKS senior precious metals dealer Alex Thorndike said.

“Producer selling in gold continues to cap a definitive move through $1,300-1,305, while Asian buying in the low $1,290’s continues to support on dips,” he said.

In other precious metals, silver fell 0.3% to $16.83/oz.

Palladium was down 0.4% to $1,018.05/oz and platinum was also 0.4% lower, at $900.65/oz.

Reuters