Gold wilts as it feels the pressure of a stronger dollar
Bengaluru — Gold prices eased for a second session on Tuesday as a stronger dollar and bullish US interest rate outlook outweighed support from an earlier equity market sell-off.
Spot gold was down 0.1% at $1,186.06/oz at 11.29am GMT. On Monday, it fell 1.2% in its biggest one-day percentage fall since August 15, also touching a more than one-week low of $1,183.19.
US gold futures edged 0.1% higher to $1,189.80.
Europe battled to fend off a four-day losing streak for world stocks, after weary investors saw Asian shares stumble to a 17-month low and bond markets hit by a fresh bout of selling.
Adding to the bleak outlook, the International Monetary Fund (IMF) on Tuesday cut its global economic growth forecast for the first time since 2016, citing pressures from ongoing trade tussles between the US and China.
“Some of the main themes in gold markets are the US Federal Reserve rate hike, higher yields and dollar strength,” said Jens Pedersen, senior analyst at Danske Bank. “At the same time, fragile emerging markets and higher oil prices will mitigate those headwinds.”
The monetary policy by the Fed is dominating the equation, putting downward pressure on gold.… The $1,200 level should be the centre of gravity for gold to sway back and forthMark To
Gold has held in a $34 range for the past one-and-a-half months, which some analysts say suggests resilience, supported by concern over economic growth in emerging markets and inflationary pressures from rising US treasury yields and soaring oil prices.
Traders said Monday’s drop in prices triggered some physical demand for gold in China, the world’s biggest consumer.
However, the metal has lost much of its safe-haven appeal in 2018, with investors increasingly opting for the greenback instead, as the expectation of further US interest rate hikes make gold less attractive.
Higher interest rates boost the dollar and push bond yields up, putting pressure on gold by increasing the opportunity cost of holding non-yielding bullion.
“The monetary policy by the Fed is dominating the whole equation, putting downward pressure on gold.… The $1,200 level should be the centre of gravity for gold to sway back and forth." said Mark To, head of research at Hong Kong's Wing Fung Financial Group.
The Fed increased interest rates in September for the third time this year and is widely expected to hike again in December, with no suggestion the central bank’s tightening policy will end any time soon.
Spot gold may end its recent weak bounce below resistance at $1,193/oz, and then retest support at $1,184, as suggested by a projection analysis, said Reuters technical analyst Wang Tao.
Among other precious metals, spot silver eased 0.3% to $14.30.
Platinum inched 0.7% lower to $811.90 and palladium dipped 0.1% to $1,073.70.