Gold steadies as dollar runs out of steam
But the metal’s failure to capitalise on safe-haven buying, in the high-risk environment of the US-China trade war, is causing consternation
London — Gold steadied on Thursday as the dollar came off the boil, though the market lacked direction and seemed unable to capitalise on escalating trade tension.
Stock markets and commodities regained some poise after a turbulent session on Wednesday when the US ratcheted up trade war threats against China, while the dollar held at a nine-day high.
The dollar’s failure to push ahead, especially against the euro, is viewed by some market watchers as a sign it may have peaked for now as the Federal Reserve might slow its cycle of rate increases if stocks fall sharply.
A weaker dollar makes dollar-priced gold cheaper for non-US investors who make up the bulk of gold buyers.
"The (gold) market is lacking direction and very technical in its characteristics," said Alasdair Macleod, head of research at Goldmoney.com.
Looking ahead, however, he said: "Gold could go marginally better. There are signs that the US economy may be slowing down a bit and if that’s so, we can expect the Fed to take its foot off the interest rate pedal a bit."
Spot gold was up 0.2% at $1,244.95 at 10.21am GMT. In the previous session, it slipped 1% to hit its lowest in over a week at $1,240.89.
US gold futures for August delivery were flat at $1,244/oz.
Investors are looking to US consumer inflation data due later for further clues on the Fed rate outlook, with the biggest annual increase in six-and-a-half years in June US producer prices setting the scene for an upside surprise.
Elsewhere, focus was still on what the next steps in the tit-for-tat trade conflict might be. China has accused the US of bullying and warned it could hit back, although the form of retaliation is not yet clear.
Investors often turn to bullion as a safe haven in times of political uncertainty, but have not done so this time around.
"We cannot understand the weakness of the gold price in view of the risks — especially the trade war. However, if gold falls below last week’s low, the psychologically important $1,200 mark could be tested," Commerzbank said in a note.
Silver was 0.7% higher at $15.85/oz.
Earlier in the session it fell to its lowest since mid-December at $15.72/oz.
Platinum was up 0.3% at $827.25 an ounce, after falling to a more than one week low at $821.25/oz, while palladium was 0.3% higher at $938.98/oz.