Gold holds steady amid the expectation of a US rate hike

Bengaluru — Gold prices were little changed on Monday as the expectation of a US rate increase in June offset support from the concern about a trade war.

Spot gold was nearly unchanged at $1,292.96/oz by 3.40am GMT, after hitting its lowest since May 23 at $1,289.12 in the previous session.

US gold futures for August delivery were down 0.2% at $1,297.20/oz.

Better than expected US economic data released on Friday was weighing on prices, said ANZ analyst Daniel Hynes.

“Some of the risks on the geopolitical front are easing slightly.… It is going to be very difficult for gold to really push higher from here,” Hynes said.

US job growth accelerated in May and the unemployment rate dropped to an 18-year low of 3.8%, underpinning the expectation that the Federal Reserve will raise interest rates in June. Higher interest rates discourage the buying of non-interest-paying bullion, which is priced in dollars.

“It’s very common for gold to trade defensive ahead of a Fed rate hike, but with geopolitical risk premium deflating, these narratives should provide a challenge to gold’s ambitions this week,” said Stephen Innes, Asia-Pacific trading head at Oanda.

Recent strong US data overshadowed concern about escalating trade tension between the US and its allies.

Finance leaders of the closest US allies vented anger over the Trump administration’s metal import tariffs on Saturday, ending a three-day meeting with a stern rebuke of Washington and setting up a heated fight at a Group of Seven (G-7) summit next week in Quebec.

Meanwhile, speculators raised their net long position in Comex gold contracts to the strongest since late April in the week to May 29, US Commodity Futures Trading Commission (CFTC) data showed on Friday. Dealers raised their net long position in Comex gold by 33,708 contracts to 61,235, the data showed.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 1.25% to 836.42 tonnes on Friday.

In other precious metals, spot silver was 0.1% higher at $16.37/oz.

Platinum was nearly unchanged at $899.50/oz and palladium rose 0.5% to $1,004/oz. Earlier in the session, it touched its highest in more than three weeks at $1,007.50.