Gold inches lower amid muted response to US-Iran friction

Bengaluru — Gold prices edged down on Tuesday on a firmer dollar and a rise in US treasury yields and as investors’ reaction to the dispute between the US and Iran remained muted.

Spot gold was down 0.2% at $1,221.61/oz at 3.59am GMT.

US gold futures for August delivery were 0.3% lower at $1,221.90/oz. The dollar index, which measures the greenback against a basket of six major currencies, held steady at 94.662. It hit a one-year high of 95.652 last week.

“In addition to the US dollar, there has been little follow through on the [US President Donald] Trump and [Iranian President Hassan] Rouhani war of words and frankly the overall reaction on risk sentiment was muted,” said Stephen Innes, Asia-Pacific trading head, Oanda.

“I think the market realises the chance of this escalation leading to a US military reprisal is overblown.”

Iran on Monday dismissed an angry warning from Trump that Tehran risked dire consequences if it made threats against the US.

Trump on Sunday warned Rouhani not to threaten the US again, after Rouhani cautioned Trump about pursuing hostile policies against Tehran.

Gold prices, which usually gain in times of political and financial instability, had failed to do so, analysts noted.

“The fall in both oil and gold prices overnight is a testament that investors are likely [to be] focused on oversupply risks rather than on geopolitical risks which are traditionally short-lived in nature,” OCBC said in a commentary on Tuesday.

Benchmark 10-year US Treasury yields rose to their highest in five weeks on Monday as the Federal Reserve was seen as likely to continue raising interest rates despite criticism from Trump. The expectation that the US Federal Reserve will raise interest rates put pressure on gold prices as the metal does not yield interest.

“Technically, gold is struggling very hard to recover and as long as the dollar remains in charge gold is going to suffer,” a Hong Kong-based trader said.

Also, gold had broken the 200-day moving average on a weekly basis, giving the metal a tinge of technical weakness, the trader added.

Spot gold looked neutral in a range of $1,214/oz-$1,237/oz, Reuters technical analyst Wang Tao said.

Meanwhile, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), rose 0.55% to 802.55 tonnes on Monday.

In other precious metals, silver was down 0.2% at $15.34.

Platinum was 0.6% lower at $826.25/oz and palladium fell 0.7% at $908.85/oz.

Reuters