Gold falls as strong dollar outshines safe-haven demand

Bengaluru — Gold prices fell for a second day on Tuesday to the lowest since December as strength in the US dollar put pressure on the metal, offsetting safe-haven demand amid mounting global trade tension.

Spot gold fell 0.2% to $1,239.63/oz as of 3.42am GMT after earlier dropping to its lowest since December 12 at $1,237.36. In the previous session, it fell about 1%. US gold futures were 0.1% lower at $1,240.60/oz.

“It’s all about the [dollar] demand rather than any news specific as the markets insatiable demand for the [dollar] to ride out yet another building perfect storm has the [dollar] glittering. As such, gold is especially vulnerable in such an environment,” said Stephen Innes, Asia-Pacific trading head at Oanda.

The dollar was a shade lower on Tuesday but remained broadly supported after strong US economic data.

A stronger dollar increases the cost of dollar-denominated bullion for investors paying in other currencies. Meanwhile, Asian shares hit a nine-month low on Tuesday on the rising fear over tense trade relations between the US and major economies, as Chinese markets saw another rocky day. The US is set to place tariffs on $34bn worth of Chinese goods on July 6. US President Donald Trump warned the World Trade Organisation (WTO) on Monday that “we’ll be doing something” if the US was not treated properly, just hours after the EU said that US automotive tariffs would hurt its own vehicle industry and prompt retaliation. The US Chamber of Commerce on Monday denounced Trump’s handling of global trade disputes, issuing a report that argued tariffs imposed by Washington and retaliation by its partners would boomerang badly on the American economy.

Gold is usually seen as a safe-haven asset in times of political and economic uncertainties but has lately failed to do so.

“Gold seems to be under pressure until we get to a level when everyone starts stepping in but that might be only between $1,235/oz and $1,215/oz,” a Hong Kong-based trader said.

Spot gold might break a support at $1,237/oz and fall to the next support at $1,229, Reuters technicals analyst Wang Tao said.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), said its holdings fell 1.19% to 809.31 tonnes on Monday.

In other precious metals, silver was down 0.1% at $15.82/oz and palladium fell 0.4% to $940.10/oz.

Platinum was 0.3% lower at $813.30/oz.

In the prior session, it fell to the lowest since December 2008 at $804.

Autocatalyst metal platinum tumbled as the greenback strengthened, an intensifying US-EU trade spat pressured precious metals, and political risk in Germany weighed.

Reuters