Gold range-bound after Trump fails to give direction

Bengaluru — Gold was range-bound on Wednesday, with gains capped by a firmer dollar as investors awaited further news on US-China relations after US President Donald Trump’s state of the union speech offered little clarity on the trade front.

Uncertainties surrounding Brexit and the threat of another government shutdown in the US over Trump’s call for a border wall with Mexico kept bullion supported, analysts said.

Spot gold was 0.1% lower at $1,313.39 per ounce at 10.47am GMT. US gold futures were also down 0.1% at $1,317.30 an ounce.

Liquidity remained low with China and several other markets in Asia still closed for the Lunar New Year holiday.

“There is lack of direction in the market and sentiment is neutral. The market wants more clarity on Brexit and the US-China trade front,” said ABN AMRO analyst Georgette Boele. Gold is likely to be range-bound between $1,310 and $1,320 this week with $1,300 as the nearest support level, she added.

In his speech on Tuesday, Trump again vowed to build a border wall and said a trade deal was possible with China if Beijing agrees to “real structural change”.

“There was no huge market-related development out of Trump’s speech last night and the dollar has barely changed. Gold is still consolidating above $1,300,” Capital Economics analyst Ross Strachan said.

However, senior US and Chinese officials are poised to start another round of talks in Beijing next week. Trump has vowed to increase tariffs on $200bn worth of Chinese imports if the two sides cannot reach a deal by March 2.

The dollar index, which tracks the greenback against a basket of major currencies, was little changed after Trump’s address, standing near a two-week high.

Investors are also keeping a close eye on signals from the US Federal Reserve on its future monetary policy trajectory. Dallas Fed president Robert Kaplan said the Fed should leave interest rates where they are until the US economic outlook is clearer. Last week, the Fed  promised to be “patient” with its rate moves due to an impending slowdown and uncertain trade backdrop.

A cut in interest rates would add pressure to the dollar and support the greenback-denominated bullion, making it cheaper for holders of other currencies. Reflecting the subdued sentiment, holdings in the world’s largest gold-backed exchange-traded fund (ETF), SPDR Gold Trust, have fallen for three straight sessions.

Among other precious metals, palladium fell 1% to $1,368.50 an ounce. Silver was down 0.5% at $15.76 an ounce, and platinum slipped 0.2%, to $814.57 an ounce.

Reuters