Gold slips after Fed comments support the dollar

Bengaluru — Gold eased on Tuesday after touching a more than two-week low in the previous session, as increasing bets that the US Federal Reserve will not cut interest rates in 2019 boosted the dollar which usurped bullion’s safe-haven appeal.

Spot gold fell 0.2% to $1,275.61 per ounce at 0334 GMT. Last session, gold dipped to a more than two-week trough of $1,273.22.

US gold futures also eased 0.2% to $1,275.20 an ounce.

The dollar held near a 2½-week high on Tuesday, supported by higher US-yields and as intensifying trade frictions between the US and China boosted appetite for the safe-haven greenback.

“The dollar strength is starting to re-emerge because the Fed really hasn’t been as dovish as market participants are looking for,” said David Song, an analyst at DailyFX.

“As long as the data continues to come broadly in line with what the Fed is looking for, we are watching a theme right now where the Fed is really reluctant to conclude their hiking cycle.”

Fed chair Jerome Powell said on Monday it was “premature” to ascertain the impacts of trade and tariff on the trajectory of monetary policy instead enunciating that recent economic data pointed towards a healthy supply side.

Elsewhere, Asian shares wobbled near four-month lows on mounting worries the White House’s black-listing of Chinese telecom giant Huawei could further inflame already tense relations between the US and China.

Gold, which is generally considered a safe-haven asset, has shrugged most news of escalating tensions, much to the bulls’ dismay, analysts said.

Analysts said now the dollar has started to mimic its characteristics from 2018 when it was preferred over gold by investors looking to hedge against a simmering trade war.

Beijing on Monday accused Washington of harbouring “extravagant expectations” for a deal to end their stretched trade dispute, sparking worries that the two countries were digging for a longer, costlier trade war.