Gold hits one-week low on stronger dollar

Bengaluru — Gold hit a one-week low on Tuesday, following a rally in the dollar after US President Donald Trump warned of higher tariffs on all imports from China ahead of a meeting with his counterpart Xi Jinping.

Spot gold inched 0.1% higher to $1,223.75 an ounce at 11.12am GMT, after touching its lowest since November 19 at $1,219.04.

US gold futures were up 0.1% at $1,223.70 an ounce.

Trump is expected to meet Xi to discuss the trade dispute at the Group of 20 (G20) summit in Argentina this week.

“If they agree on making some sort of progress on the trade side, that could be quite positive for gold as it would likely weigh on the dollar, which has been the safe-haven currency in this trade debate,” Julius Baer analyst Carsten Menke said.

“But any kind of escalation would likely be negative for gold.”

Trump said on Monday he was “highly unlikely” to accept China’s request to hold off raising tariffs, which is due to take effect on January 1.

That supported the dollar index against a basket of major currencies. The index rose to its highest in almost two weeks, translating into higher gold prices for holders of other currencies.

Falling European stock markets on Monday limited some of gold’s losses.

But gold has still fallen around 10% since April, hit by rising US interest rates and a lingering trade war.

“The big story still is that the US Federal Reserve is going to continue hiking interest rates and that supports the dollar and likewise keeps gold in check,” Menke said.

The Fed has raised rates three times this year and a fourth rate hike is expected in December. Higher rates raise the cost of holding gold, which earns nothing and carries costs for storage and insurance.

Investors looked ahead to Fed chair Jerome Powell’s speech and minutes from the Fed’s November 7-8 meeting, due later this week, which could indicate the pace of rate hikes in 2019.

Indicative of investor sentiment toward bullion, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.15% to 761.74 tons on Monday.

Meanwhile, speculators cut their net short positions in Comex gold and silver contracts in the week to November 20.

Among other precious metals, spot silver was up 0.4% at $14.29 an ounce, having hit $14.14 an ounce earlier, its lowest since November 15.

Spot platinum inched 0.1% lower to $839.25 an ounce, while palladium was steady at $1,141 an ounce.

Reuters