Gold holds near two-week low as dollar saps its strength

Bengaluru — Gold edged lower on Wednesday to hover near a two-week low, as a stronger dollar and signs of easing China-US friction dented demand for bullion ahead of the minutes from the US Federal Reserve’s latest meeting.

Spot gold edged down 0.1% to $1,274.10/oz at 4.43am GMT. In the previous session, the metal fell to $1,268.97, its lowest level since May 3.

US gold futures were unchanged at $1,273.70/oz.

The dollar hovered near a four-week high supported by higher US yields, which rose overnight after the US eased trade restrictions on Chinese telecommunications equipment maker Huawei Technologies.

“A stronger dollar and Washington’s extension to Huawei for three months has put the knife into gold,” Oanda analyst Jeffrey Halley said.

On Monday, the US commerce department granted Huawei a licence to buy US goods until August 19, a move intended to give telecom operators that rely on Huawei enough time to make alternative arrangements.

“The market has been tipping it as an easing of trade friction, so we have seen a rotation out of safe-harbour trade, albeit temporarily,” Halley added.

Chinese ambassador to the US Cui Tiankai on Tuesday said Beijing was ready to resume talks with Washington, but blamed the latter for frequently “changing its mind” on tentative deals.

Gold is now more than 5% below its late-February 2019 peak of $1,346.73/oz.

Meanwhile, investors await the release of the US Federal Reserve’s minutes at 6pm GMT, which is expected to provide insights into the May 1 meeting by the central bank, when policymakers kept interest rates steady and signalled little appetite to adjust them any time soon.

On Monday, Fed chair Jerome Powell reiterated his unmoved demeanour, stating it was premature to ascertain the impact of trade and tariffs on monetary policy.

“Despite the volatile environment, investors perhaps still believe that the equity market provides better capital gains due to the Fed’s actions, and are playing down the need for a hedge,” Howie Lee, an economist at OCBC Bank, said.

Meanwhile, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.4% to 739.69 tons on Tuesday.

However, holdings have fallen nearly 7% so far in 2019, indicating a subdued investor interest in bullion.

Spot gold may now test support at $1,264/oz, and a break below that could open the way towards $1,244, says Reuters technical analyst Wang Tao.

Among other precious metals, silver was steady at $14.45/oz.

Platinum edged down 0.3% to $811.24/oz, while palladium inched down 0.1% to $1,318.28/oz.