Gold is steady as concern about turmoil in Italy counters strong dollar

London — Gold prices were steady on Wednesday as the concern about political turmoil in Italy and over a trade conflict between China and the US outweighed strength in the dollar.

Italy kept the dollar at 10-month highs versus the euro amid the concern that repeat elections may become a de-facto referendum on Italian membership of the currency bloc.

The turbulence underpinned gold due to its appeal as a store of value during political and financial uncertainty.

The dollar index, which measures the greenback against a basket of six major currencies, hovered near its six-and-a-half-month peak from the previous session. A stronger dollar makes assets such as gold more expensive for holders of other currencies, curbing demand.

“There has been a little bit of support from what has been happening in Italy and the potential implications for the eurozone from the Italian crisis,” Capital Economics commodities economist Simona Gambarini said. “But it doesn’t seem like the worries are big enough to warrant an increase in prices,” she said. Price support was slightly eroded by the potential for an interest rate increase in June by the US Federal Reserve, she said.

US benchmark 10-year treasury yields on Tuesday registered their largest one-day drop since Brexit nearly two years ago. Higher rates could dent demand for non-interest-paying gold.

Spot gold barely changed at $1,298.98% by 9.32am GMT while US gold futures for June delivery edged slightly lower to $1,298.70/oz.

China on Wednesday lashed out at Washington’s unexpected statement that it still held the threat of imposing tariffs on $50bn of Chinese goods, saying Beijing was ready to fight back in any trade war.

But Capital Economics’ Gambarini said the potential trade war between China and the US was mostly priced into gold, which would need an escalation or resolution to become a catalyst to prices again.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (EFT), rose 0.35% to 851.45 tonnes on Tuesday.

In other precious metals, spot silver was stead at $16.40/oz.

Platinum fell 0.5% to $899.35/oz, while palladium was 0.6% lower at $973.90.