Gold inches higher but strong dollar caps gains

Bengaluru — Gold prices edged up on Friday after falling nearly 1% in the previous session, but the expectation of higher US interest rates and a robust dollar amid the China-US trade war kept a lid on the market.

Gold has lost its appeal as a safe-haven asset amid international trade disputes and the Turkish currency crisis, with investors increasingly turning to the US dollar instead.

Spot gold was up 0.2% at $1,187.06/oz at 3.37am GMT, after falling about $10 on Thursday. Prices have risen 0.2% so far this week, after dropping for six consecutive weeks.

US gold futures were down 0.1% at $1,192.60/oz.

US and Chinese officials ended two days of talks on Thursday with no major breakthrough as their trade war escalated with activation of another round of tariffs on $16bn worth of each country’s goods.

“Investors are worried about the trade war and that has helped the dollar. But the dollar will not be as strong as it has been going forward and that should help gold prices to go up,” said Ji Ming, chief analyst at Shandong Gold Group.

The dollar eased 0.1% to 95.587 against a basket of six major currencies on Friday, after rising 0.6% the day before.

Investor focus is shifting to a speech by Federal Reserve chair Jerome Powell later on Friday at an annual meeting of central bankers in Jackson Hole, Wyoming.

Fed policymakers broadly agree that US interest rates should rise further this year and next, despite US President Donald Trump’s displeasure with such a plan, two policy makers’ comments underscored on Thursday.

“Fed officials have been repeatedly saying that rates will be raised in the future and there was no surprise in that. What their reaffirmation tells the market is that the central bank will not be influenced by President Donald Trump,” Ming said.

Gold has fallen about 9% so far in 2018 on a firm dollar and rising interest rates. Prices touched one-and-a-half-year lows last week, before recovering a touch.

“There is some buying as gold has been in a downward trough for a while. $1,200 remains an interesting level and we might see prices going down again if that level does not hold,” said Brian Lan, MD at dealer GoldSilver Central in Singapore.

Negative sentiment towards gold was reflected in record net short positions and liquidations in exchange traded funds (ETFs).

Holdings of SPDR Gold Trust, the world’s largest gold-backed ETF, have fallen more than 3-million ounces from a peak in late April.

Spot silver was up 0.2% at $14.49/oz, after touching a one-week lows of $14.41 on Thursday.

Platinum was up 0.6% at $779.80/oz, after earlier hitting its lowest in a week at $769.50.

Palladium was steady at $915.50/oz.

Reuters