Gold inches higher, but dollar caps gains

Bengaluru — Gold edged higher on Thursday as investors bought into the market after a sharp fall in the previous session, though bullion’s gains were limited by a firm dollar.

Gold prices slipped as much as 2% on Wednesday as US political uncertainties stemming from an impeachment inquiry into President Donald Trump drove investors to the safety of the dollar.

“People still see the dollar as the prime destination for safety, so essentially the dollar has taken some of gold’s safe-haven flows,” said FXTM analyst Lukman Otunuga.

The dollar index climbed to a three-week peak and was hovering within striking distance of a two-year high of 99.370 hit in August.

Spot gold showed signs of recovery on Thursday, rising 0.2% to $1,506.86/oz by 11.51am GMT. US gold futures were up 0.1% at $1,513.70.

“Essentially, the $1,500 level for gold could act as a support which may attract buyers to push it higher,” said Otunuga, adding that the dollar could prompt declines in the short term.

European shares, meanwhile, gained ground after encouraging comments from China about international trade.

The Chinese commerce ministry said Beijing is in close communication with Washington and preparing to make progress at trade talks in October.

Bullion has risen more than 17% this year, propelled by trade tension and an increasingly dovish monetary policy shift by central banks because of fears over slowing growth.

“Geopolitical developments are still supportive to the precious [complex], however it looks as though fast money over-extended the recent rally,” MKS PAMP said in a note.

“The move lower has seen participants take advantage of the lower entry point as the metal still holds the uptrend, while ETFs [exchange-traded funds] continue to see inflows.”

Holdings of SPDR Gold Trust, the world’s largest gold-backed ETF, jumped to 924.94 tonnes on Wednesday, up 1.8% from the previous day.

Investors were also watching for developments in the Democrats’ decision to begin an impeachment inquiry into Trump after a summary of a telephone call showed the US president had asked Ukraine’s president to investigate a political rival.

On the technical side, spot gold is likely to fall to $1,488/oz after breaking support at $1,514, said Reuters technical analyst Wang Tao.

Elsewhere, silver eased 0.1% to $17.88/oz, platinum was up 0.7% at $931.40 and palladium gained 0.8% to $1,656.14.