Dollar resurgence sends gold below key level
Several factors that boosted the metal earlier in January now seem to be having no effect, says an INTL FCstone analyst
Bengaluru — Gold prices edged lower on Tuesday, hovering near three-week lows touched in the previous session, as a firmer dollar made bullion more expensive for buyers using other currencies.
Spot gold was down 0.2% at $1,277.24/oz by 3.13 GMT, after touching its lowest since December 28 at $1,276.31 on Monday. US gold futures fell 0.4% to $1,277.20/oz.
The dollar hovered near two-week highs against its peers on Tuesday.
“Gold has become a victim of a stronger greenback in the short term. A weaker euro and concerns around growth in Europe have given a leg up to the dollar, pushing gold prices down below the key level of $1,280,” said Kyle Rodda, market analyst with IG Markets.
“We haven’t seen much of data coming out of US recently due to the government shutdown. If we see more weaker data that could cause bond yields to fall and support gold. Also, technically, we need to see gold push above the challenge of $1,300 level.”
The dollar’s rise weighed on gold, which has climbed more than 10% since mid-August, largely because of equity market turmoil and a weak dollar.
Weaker Chinese economic data also pressured the yuan, making gold more expensive for buyers in the world’s number two economy.
China’s economy cooled in the fourth quarter under pressure from faltering domestic demand and bruising US tariffs, dragging last year’s growth to the lowest level in nearly three decades.
Asian shares slipped on Tuesday as pessimism about world growth drove investors away from risky assets. The International Monetary Fund (IMF) trimmed its global growth forecasts and a survey showed increasing pessimism among business leaders as trade tensions loomed.
However, this did not have a big impact on gold prices.
“It seems that several factors boosting gold earlier in January now seem to be having no effect, namely, the far more dovish Fed statements and clearer signs of slowing global macro growth,” INTL FCstone analyst said in a note.
“Instead, it seems that gold is being undermined by a slightly stronger dollar along with a modest uptick in US 10-year yields.”
Fed officials have left little doubt that they want to stop raising interest rates, at least for a while.
Higher interest rates tend to reduce appetite for nonyielding gold.
Meanwhile, spot palladium, which hit a record high of $1,434.50 last week driven by a sustained deficit and rising demand, stood firm at $1,361.50/oz.
Platinum was down 0.1% at $790.
Silver, meanwhile, fell 0.1% to $15.20/oz.