Gold slips as trade optimism lifts dollar

Bengaluru — Gold prices edged down on Tuesday in a second straight session of losses, as hopes of a Sino-US trade pact boosted the dollar and spurred appetite for riskier assets, blunting investors’ interest in holding the non-yielding bullion.

Spot gold was down 0.3% at $1,505.27 an ounce by 3.18am GMT, while US gold futures were down 0.2% to $1,507.70 an ounce.

Beijing and Washington have shown signs of progress in trade talks, with the Financial Times saying on Monday that the US is considering whether to drop some tariffs on Chinese goods.

“The recent hopes of a trade truce between the US and China have led to the strengthening of the dollar overnight, dragging prices today,” Michael McCarthy, chief market strategist at CMC Markets said.

The US dollar was close to its highest in almost a week against a basket of rivals on Tuesday, while Asian shares closed in on their July peak, on growing optimism for the US and China to strike a preliminary deal to scale back their long-drawn trade war.

A stronger dollar makes gold expensive for holders of other currencies.

“Some positive trade headlines over the weekend and buoyant risk sentiment with equities at highs will be a test of gold’s resilience and market conviction in gold’s uptrend,” UBS strategist Joni Teves said in a note.

Shaving fears of a recession, recent data suggest the outlook for the world’s largest economy is not as bad as some had feared, though the US Federal Reserve has cut interest rates three times in 2019.

After data last week showed US job growth had slowed less than expected in October, investors await a US ISM non-manufacturing report due on Tuesday that is forecast to show activity accelerated slightly in October.

“We might see gold hitting the $1,400 level over the next year, given the positive growth outlook that is being suggested by the recent economic data,” CMC Markets’ McCarthy said.

However, data on Monday showed new orders for US-made goods fell more than expected in September and business spending on equipment was slightly weaker than initially thought, suggesting that manufacturing remains soft amid the trade war between the world’s two biggest economies.

Among other metals, silver eased 0.2% to $18.02 an ounce and platinum was steady at $936.24 an ounce, having fallen more than 1% in the previous session.

Palladium was up 0.5% at $1,787.51 an ounce, after falling 1.5% in the previous session.

Reuters