Gold benefits from dollar’s weakness as US shutdown looms
Bengaluru — Gold prices edged up on Friday, supported by a weaker dollar amid concern about a possible US government shutdown.
The precious metal nonetheless remained on track for its first weekly drop in six weeks.
Spot gold was up 0.3% at $1,331.10 an ounce by 3.24am GMT. On Thursday it touched its weakest level since January 12 at $1,323.70, having fallen from recent four-month highs.
Spot gold has fallen 0.5% so far this week, its worst since the week-ending December 8.
US gold futures were up 0.3% at $1,331.40.
The dollar fell amid concern about a possible US government shutdown. The dollar index was down 0.1% at 90.394 on Friday.
Legislation to avoid a US government shutdown at midnight on Friday advanced in Congress, as the House of Representatives on Thursday night approved an extension of federal funds until February 16, although the bill faced uncertain prospects in the Senate.
"The overall run in gold has been overdone…. People have to be careful with further allocations in gold and other asset classes as well for now," said Mark To, head of research at Hong Kong’s Wing Fung Financial Group.
"The overall weakness in the dollar is over … I can’t be more cautious on the gold price at the moment."
The dollar has been falling since 2017, largely on expectation that central banks besides the Federal Reserve are seeking to end their policy of ultra low, even negative, interest rates adopted to combat the 2008 global financial crisis and the recession that followed.
The US Federal Reserve should raise interest rates three to four times in both 2018 and 2019, Cleveland Federal Reserve Bank president Loretta Mester said on Thursday, a pace that is a bit faster than many of her fellow policy makers prefer.
"The fundamentals remain the same, with the large trading range remaining intact at $1,200 to $1,400, with no major change in global political tensions or rate hike outlook," To said.
Reuters technical analyst Wang Tao said spot gold was still targeting $1,311 an ounce, as suggested by a small double-top and a Fibonacci retracement analysis.
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 1.42% to 840.76 tonnes on Thursday from Wednesday.
Among other precious metals, silver rose 0.5% to $17.01 an ounce.
Platinum rose 0.2% to $1,002, while palladium fell 0.5% to $1,105.