Gold hits six-month low as investors seek other safe havens

Bengaluru — Gold prices extended fall on Wednesday to a six-and-a-half-month low as the US dollar steadied and investors increasingly turned to other safe-haven assets, amid expectations of more interest rate hikes by the US Federal Reserve.

Spot gold fell for a third straight session and was down 0.2% at $1,255.88 an ounce at 4.08am GMT, after hitting its lowest since mid-December at $1,253 earlier in the session.

US gold futures for August delivery were 0.2% lower at $1,257.50 an ounce.

“Gold does not seem to be benefiting from any risks relating to rising trade tensions, but is experiencing declines from a firmer dollar and any improvement in equity markets,” said John Sharma, an economist at National Australia Bank.

“It appears that investors are seeking safe havens in the US Treasuries and currencies such as the Japanese yen. Near term, gold will remain under pressure.”

The US House of Representatives overwhelmingly passed a bill on Tuesday to tighten foreign investment rules, spurred by bipartisan concern about Chinese bids to acquire sophisticated US technology.

US President Donald Trump endorsed Treasury Secretary Steven Mnuchin’s measured approach to restrict Chinese investments in US technology companies.

The dollar held steady against a basket of currencies, having gained 0.4% overnight to snap four sessions of falls to a two-week low.

However, it was down 0.2% at ¥109.90 against the yen, often sought in times of market turmoil and political tensions, after earlier touching ¥110.20.

A stronger dollar and higher US interest rates reduce demand for non-interest-bearing gold as the metal becomes more expensive for holders of other currencies.

The strong dollar and the prospect of a fourth rate hike have tempered gold prices, said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

Dallas Federal Reserve Bank President Robert Kaplan said he believed the US central bank’s monetary policy was still accommodative and suggested the Fed could raise rates at least two more times.

However, Atlanta Fed president Raphael Bostic said intensifying trade tension over the past week had raised risks to the US economy, and he might rule out a fourth rate increase for the year if the trade war gets worse.

If the trade war continues, it would affect the global economy and could eventually push up gold prices, said Leung.

Meanwhile, silver fell 0.2% to $16.23 an ounce. Platinum declined 0.3% to $862.95 an ounce, while palladium was 0.6% higher at $962.10.

Reuters