Gold inches up after sharp fall, but no one expects a strong rebound

Bengaluru — Gold prices edged higher on Wednesday, after the previous session’s sharp fall, but rising US interest rates and lingering China-US trade tension continued to weigh on the market, with investors selling the metal at small rallies.

Spot gold was up 0.3% at $1,204.64 an ounce at 3.29am GMT. Prices hit their highest since August 10 at $1,214.28 on Tuesday, but closed 0.8% lower as US Treasuries rose after the US and Mexico struck a trade deal.

“The selling (on Tuesday) shows nobody wants to chase the metal above $1,210…. There are going to be interest rate hikes in September and December, and that is acting as a burden for gold,” said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

Gold has lost its appeal as a safe-haven asset, having fallen 7.5% this year, amid international trade disputes and the Turkish currency crisis, with investors increasingly turning to the dollar instead.

The dollar was stuck in a tight range on Wednesday after touching a four-week low overnight as optimism over the US-Mexico trade deal gave way to caution ahead of an upcoming deadline in the China-US trade dispute.

The deadline for public comment on US President Donald Trump’s increased tariffs on $200bn of Chinese goods is September 5.

As long as trade tension between the US and China persists, the dollar will benefit and, in turn, hurt gold, analysts said.

Spot gold is expected to retest a support level at $1,200 an ounce, a break below which could cause a fall to $1,193, Reuters technical analyst Wang Tao said.

“If gold can consolidate around the present levels and hit $1,215 again, then we might see prices move to $1,235-$1,240,” Leung said.

Gold prices have recovered some ground after touching a year-and-a-half low on August 16 and are holding above the key psychological level $1,200.

However, that has not reversed investors’ bearish stance on the precious metal, with no let-up in liquidations in exchange-traded funds, and record short positions in Comex gold.

Holdings in the largest gold-backed ETF, SPDR Gold Trust GLD, have declined by 3.6-million ounces from a peak in late April.

“It looks like people are happy to be short. We need some incentives for the shorts to be covered, which is missing at this point of time,” said Yuichi Ikemizu, Tokyo branch manager at ICBC Standard Bank.

Spot silver was up 0.6% at $14.75.

Platinum rose 0.9% to $789.99, while palladium was down 0.1% at $939.80 after hitting a seven-week top at $956 on Tuesday.