Gold slips to five-week low on US-China trade deal hopes

Bengaluru — Gold fell to the lowest in more than five weeks on Monday as the dollar held firm and investors opted for riskier assets on hopes of a thaw in a trade dispute between the US and China.

Spot gold slid 0.5% to $1,286.60 an ounce as of 10.48am GMT, having touched $1,285.65, its lowest since January 25 earlier in the session.

US gold futures were down 0.9% to $1,288.

Gold tumbled 2.6% last week, its biggest weekly fall in over one-and-a-half years.

“Increasing risk appetite is clearly a little negative for gold,” Julius Baer analyst Carsten Menke said.

“We saw quite a bit of selling on Friday as the dollar strengthened and that’s continuing today, putting some pressure on gold. The break below $1,300 (on Friday) also triggered some more selling from technical traders.”

Global markets rose on expectations that the two largest economies in the world might stave off a drawn-out trade war.

A source briefed on negotiations said the two countries were likely to reach a deal, rolling back US tariffs on at least $200m worth Chinese goods.

“Equities had their best start into the year since 1991, sentiment is positive again and against that backdrop, it is not surprising that we’ve seen some selling out of gold-backed products,” Menke said.

Also, the dollar consolidated gains after posting its biggest monthly rise in four months, reducing appeal for gold among holders of other currencies.

Indicative of sentiment, holdings of SPDR Gold Trust, the world’s largest, gold-backed exchange-traded fund, fell 1.5% on Friday, their biggest one-day percentage fall since December 2016.

SPDR holdings are now down over 1.5% this year.

Gold could “lose further ground” if data at the end of the week points to an improvement in the US labour market, analysts at Commerzbank said in a note.

The metal may break a support at $1,289 an ounce and fall towards the next support at $1,271, according to Reuters analyst Wang Tao.

Among other precious metals, palladium gained 0.2% to $1,547.90 an ounce.

The threat of a possible strike in SA, a major producer of the autocatalyst metal, is keeping the prices high, analysts said.

“Palladium supply and demand (are) inelastic until catalyst producers start substitute” a BofA Merrill Lynch Global Research report stated, adding that the metal would still be in preference for at least another year.

Platinum was down 1.4% to $844.75 an ounce.

Spot silver shed 0.4% to $15.14, having hit a trough since December 27 last year at $15.08 earlier. 

Reuters