Gold makes a small recovery as dollar eases

Bengaluru — Gold prices inched up on Wednesday as the dollar retreated from a 16-month high touched earlier in the week, easing amid a surge in the euro and sterling on a draft Brexit agreement.

Spot gold rose 0.2% to $1,203.88 an ounce at 3.51am GMT. Prices slipped to their lowest level since October 11, at $1,195.90, in the previous session.

US gold futures were also up 0.2%, at $1,203.20/oz.

“There has been some stalling in the dollar … helping gold to pick up,” said John Sharma, an economist with National Australia Bank (NAB).

A weaker greenback makes dollar-denominated gold cheaper for holders of other currencies.

“We are seeing investors and speculators snapping up gold because gold has the potential to go up to $1,230 to $1,240,” said.

The dollar index, which measures the greenback against a basket of six major currencies, was down about 0.2%, pulling back from a 16-month high.

However, the selloff in the dollar has been due to the improved risk sentiment around a potential Brexit deal and not because of any deterioration in the fundamentals of the US economy, analysts said.

The British cabinet will meet at 2pm GMT on Wednesday to consider the withdrawal agreement after Britain struck a draft divorce deal with the European Union.

The uncertainties in Europe over Italy’s budget and Brexit, nervous movement in the stock market and the US-China trade tensions are keeping gold firm, said Yuichi Ikemizu, Tokyo branch manager at ICBC Standard Bank.

“I expect gold to go up rather than down from here because investors are still not sure about the outcome of these events,” Ikemizu said.

Global shares sagged on Wednesday on concern about global growth. MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.4%.

Spot gold may bounce to $1,211 an ounce, as it has found a support near $1,195, Reuters technical analyst Wang Tao said.

Meanwhile, holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, fell 0.11% to 761.16 tons on Tuesday.

Among other precious metals, silver was up 0.1% to $13.99/oz, having touched a more than two-month low of $13.91 in the previous session.

Palladium rose 0.1% to $1,111.10/oz, while platinum fell 0.1% to $834.24/oz.

Reuters