Gold. Picture: REUTERS
Gold. Picture: REUTERS

London — Gold hit a two-week high on Thursday as the dollar fell and investors fretted over weak Chinese data and US-China trade frictions, though the precious metal’s upside was capped by a slightly more hawkish US Federal Reserve.

The dollar edged back against the euro as speculation grows that the European Central Bank (ECB) will signal an end date for its vast stimulus programme at its policy meeting, giving back all its gains following Wednesday’s Fed meeting.

As widely expected, the Fed lifted key overnight borrowing costs by a quarter percentage point. It also projected two more rate increases by the end of this year, compared to one previously.

A weak dollar makes dollar-priced gold cheaper for non-US investors.

Spot gold rose 0.5% to $1,304.65 an ounce at 10.20am GMT. It earlier hit a high of $1,303.58 an ounce, its best since May 31. US gold futures for August delivery rose 0.6% to $1,308.90 an ounce.

"Trade tensions and the dollar downtrend are supportive for gold, but having said that, we don’t think the upside is open because there are headwinds coming from the global recovery ... and the fact that the Fed is more hawkish," said Société Générale analyst Robin Bhar.

In the wider markets, global shares slipped amid worries over a more hawkish Fed and ECB, with investors also concerned about surprisingly weak Chinese data and US threats to impose tariffs on billions of dollars in Chinese goods.

Weaker equities tend to support gold, seen as a store of value in times of economic and political turmoil.

"Reports that US President Donald Trump was preparing to put tariffs on billions of dollars of Chinese goods as soon as Friday raised concerns in the market that economic growth would be impacted. This saw some safe-haven buying emerge," ANZ said in a note.

Trump will meet his top trade advisers on Thursday to decide whether to activate threatened tariffs on Chinese goods. China’s central bank left borrowing costs for inter-bank loans unchanged on Thursday, an unexpected decision that shrugged off the Fed’s increase in its benchmark rate overnight.

In other precious metals, silver climbed 0.7% to $17.12 an ounce, having earlier hit $17.15 an ounce, its highest since April 20. Platinum was 0.9% higher at $906.80 an ounce, while palladium gained 0.8% to $1,016.90 an ounce.

Reuters

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