Gold is hardly changed on a muted dollar

Bengaluru — Gold prices were steady on Monday, with the dollar subdued after comments from Federal Reserve officials showing caution over the global economy, prompting traders to reassess the pace of future US interest rate hikes.

Spot gold was little changed at $1,220.70/oz at 4.17am GMT, having gained about 0.7% in the previous session.

US gold futures were down 0.1% at $1,222.3/oz.

The possibility that the Fed might hold a neutral outlook beyond 2018, and a slowdown in the global economy amid the ongoing US-China trade spat will keep investors a little more interested in gold’s safe haven appeal, said Benjamin Lu, a commodities analyst with Phillip Futures.

Fed policymakers on Friday signalled further interest rate increases ahead, even as they raised relatively muted concerns over a potential global slowdown, leading markets to suspect the tightening cycle may not have much further to run.

A fourth rate hike in 2018 is expected in December and policymakers had earlier indicated two more by June 2019.

“For December the rate hike is already priced in and it’s most likely going to happen,” Lu said.

“What people will be watching out for is any decline in economic indicators that could result in a softening of the dollar [that would] help gold gain,” he said.

Prospects of higher US interest rates are negative for dollar-priced gold as they raise the opportunity cost of holding the bullion.

The dollar index, which measures the greenback against a basket of six major currencies, inched about 0.1% higher on Monday. It had declined about 0.5% in the previous trading session.

Investors were also cautious on conflicting signals on the chance of a truce in the China-US trade dispute.

Spot gold may end its current bounce below a resistance at $1,231/oz, and resume its downtrend from $1,243.28, said Reuters technical analyst Wang Tao.

Holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.19% to 759.68 tons on Friday.

Hedge funds and money managers boosted their net short position in gold by 33,378 contracts to 70,864 contracts, according to US Commodity Futures Trading Commission data. This was the highest net short position in five weeks.

Among other precious metals, silver was down 0.2% at $14.39/oz.

Palladium was up 0.3% at $1,180.50/oz, having climbed to a record high of $1,185.40 in the previous session. Friday’s surge put palladium within a whisker of parity with gold for the first time in 16 years.

Platinum inched 0.1% lower to $845.20.

Reuters