Lower equity markets boost price of gold
Despite broad risk-off sentiment, bids for gold have been limited by the dollar index climbing to a one-month high
Bengaluru — Gold prices firmed on Thursday, supported by a slide in equity markets amid renewed trade tension, but a strong dollar kept a lid on gains as investors flocked to the safe-haven US currency.
Spot gold was up 0.3% at $1,276.83 per ounce by 10.39am GMT, after falling to its lowest since May 3 on Tuesday at $1,268.97.
US gold futures were 0.2% higher at $1,276.20 an ounce.
"We have the higher dollar and lower Chinese yuan pressuring gold. At the same time, yields are a bit lower and equity markets are down," said ABN AMRO analyst Georgette Boele.
"Gold is not really a safe-haven asset at the moment. There are more offseting factors right now. Apparently there is no real strong directional move in gold at these levels," she added.
World shares were in the red as concerns grew that the China-US trade conflict was fast turning into a technology cold war between the world's two largest economies. The White House is considering Huawei-like sanctions on Chinese video-surveillance firm Hikvision over the country's treatment of its Uighur Muslim minority, a person briefed on the matter said on Wednesday.
Despite the broad risk-off sentiment, bids for bullion were limited by the dollar index climbing to a one-month high as economic and political uncertainties swept through Europe and Asia, weighing on most other major currencies.
Meanwhile, US Federal Reserve officials at their last meeting agreed that their current patient approach to setting monetary policy could remain in place "for some time", a further sign policymakers see little need to adjust rates.
"Commentary reiterating officials' wait-and-see approach amid a raft of global uncertainties may cool rate-cut hopes," DailyFx senior currency strategist Ilya Spivak said.
Lower interest rates decrease the opportunity cost of holding nonyielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.
The sentiment was reflected in holdings of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, which have fallen nearly 7% so far in 2019.
SPDR holdings edged 0.1% lower to 738.81 tonnes on Wednesday.
Among other precious metals, silver rose 0.2% to $14.48 per ounce, while palladium eased 0.3% to $1,310.70.
Platinum edged 0.1% lower to $797.80 an ounce, after touching its lowest level since February 15 at $791 earlier in the session.