Picture: ISTOCK
Picture: ISTOCK

London — Gold prices edged higher on Wednesday, underpinned by tension over North Korea, as investors looked ahead to US inflation data on Thursday that will give clues about the pace of US interest rate rises.

Gold also benefited from weakness in global stocks, the dollar and US bond yields. A weaker dollar makes gold cheaper for holders of other currencies, while lower bond yields reduce the opportunity cost of holding nonyielding bullion.

Spot gold was up 0.1% at $1,332.48 an ounce at 10.16am GMT after touching $1,322.15, the lowest since September 1, on Tuesday. US gold futures for December delivery were 0.3% higher at $1,336.70 an ounce. Demand for gold, seen as a safe investment in times of uncertainty, revived after US President Donald Trump pledged stronger measures against North Korea and Pyongyang promised to fight off what it said was the threat of a US invasion.

Investors were taking advantage of a fall in prices from last Friday’s 13-month high of $1,357,54, said Robin Bhar, head of metals analysis at Societe Generale.

"Geopolitical trouble hasn’t disappeared and the US political landscape is still fraught with difficulties," he said. "When gold drops almost $40, a lot of investors see that as a good level at which to buy back in."

The market was looking ahead to US inflation data at 12.30pm GMT on Thursday after a run of weak inflation dampened expectations that the Federal Reserve would raise rates in December. Gold is highly sensitive to rising rates because they increase bond yields and tend to boost the dollar.

"We’d have to see inflation really soaring to shake the market out of its current mindset," said Bhar. "While that mindset continues, gold will get good dip buying support."

Investors in gold-backed exchange-traded-funds (ETFs) were buying as prices fell. Holdings of the largest gold-backed ETF, New York’s SPDR Gold Trust, rose 0.35% on Tuesday from Monday. Technical fibonacci support for gold was at $1,321.60 and prices should continue to rise if they can stay above that level, analysts at ScotiaMocatta said in a note.

In other precious metals, silver was flat at $17.91 an ounce. Platinum was 0.1% lower at $985.30 an ounce and palladium was down 0.6% at $948.50.


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