Gold holds its ground as the dollar gains on Brexit turmoil

Bengaluru — Gold held steady on Thursday as the dollar regained momentum after Britain’s Brexit agreement was thrown into turmoil, offsetting limited interest in the metal from investors seeking cover from the political fallout.

Spot gold was unchanged at $1,211.21 an ounce at 10.57am GMT. Prices rose 1% in the previous session. US gold futures were up 0.1% at $1,211.60 per ounce.

The dollar index jumped, making bullion less attractive for holders of other currencies, after Britain’s Brexit deal with the EU was plunged into chaos. However, some safe-haven demand flowed into gold, a traditional store of value during times of political and economic uncertainty, as stock markets declined.

“We have seen some resignations from the British cabinet … so that uncertainty is offering some support to gold prices in the immediate term,” ING analyst Warren Patterson said. “We will find very good support at $1,200 but will struggle to break up above $1,250 in the near term.”

Just more than 12 hours after UK Prime Minister Theresa May announced that her team of top ministers had agreed to the terms of the draft agreement, Brexit minister Dominic Raab and work and pensions minister Esther McVey quit, saying they could not support it.

The dollar has emerged as a dominant safe-haven asset this year, denting appeal for gold, which has fallen 11% from an April peak as investors opted for the greenback instead, especially as the US- China trade tussle played out against a backdrop of rising US interest rates.

US consumer prices increased by the most in nine months in October amid gains in the cost of petrol and rents, pointing to steadily rising inflation that will likely keep the US Federal Reserve on track to raise rates again next month.

In the latest developments surrounding the ongoing trade dispute, US President Donald Trump is expected to meet Chinese President Xi Jinping on the sidelines of a G20 summit in Argentina later this month.

“If prices manage to remain above $1,210 there will be space for further recoveries, while another fall below the psychological threshold of $1,200 would represent a negative signal,” ActivTrades chief analyst Carlo Alberto De Casa said in a note.

Also indicative of improved appetite for gold — holdings of the world’s largest gold-backed exchange-traded fund (ETF), SPDR Gold Trust, remained near their highest level in more than two months, while central banks have also been gradually increasing their reserves of the metal, analysts said.

Among other precious metals, silver was up 0.1% at $14.15 an ounce. The metal fell to its lowest since January 21 2016 at $13.85 in the previous session. Platinum fell 0.6% to $829.74 an ounce, while palladium was 0.5% higher at $1,130.30 an ounce. 

Reuters