• Gold headed lower on Tuesday, weighed down by a stronger dollar, and may re-test a seven-month low after a failed attempt to break higher in the previous session.
• Spot gold was down 0.4 percent at $1,253 an ounce by 1405 GMT, after retreating from its highest since June 26 at $1,265.87 in the previous session.
• U.S. gold futures for August delivery slipped 0.5 percent to $1,253.70 an ounce.
• "If this dollar strength continues, we could see another test of $1,240, the lows from last week and mid-December, a crucial technical level," said Carsten Fritsch, commodity analyst at Commerzbank in Frankfurt.
• Bullion has been in a downtrend since touching $1,365.23 on April 11, the strongest in nearly three months.
• The dollar's index against a basket of six major currencies was up 0.33 percent at 94.386 after dropping to its lowest since mid-June on Monday.
• A stronger dollar makes greenback-denominated gold more expensive for holders of other currencies. Investors were also on the sidelines awaiting developments on the trade war between China and the United States, said Dick Poon, general manager, Heraeus Metals Hong Kong Ltd. Last week, the world's top two economies slapped tit-for-tat duties on $34 billion worth of each other's imports.
"Geopolitical issues, such as Britain's confused exit from the European Union and U.S. President Trump's assertion that China was impeding North Korean progress on denuclearisation, have provided some support for gold," said Sharma.
• Trump suggested on Monday that China might be seeking to derail U.S. efforts aimed at denuclearising North Korea.
• Holdings of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, dropped 0.18 percent to 800.77 tonnes on Monday, its lowest since August 2017.
• "For gold to recover, we need to see the return of investors, not only speculative but ETF investors," Commerzbank's Fritsch said.
"We may have to wait until the autumn until we see longer lasting increase in gold prices."
• David Madden, market analyst at CMC Markets said that it is difficult to get excited about gold until prices are at least above $1,284 an ounce.
“The charts are telling me that gold is still in a downtrend,” he said. “Even if the selling has slowed, I’m not overly optimistic that the bottom is in.”
Madden added that it will be difficult for gold to push higher in the near-term as the Federal Reserve continues to talk about raising interest rates two more times this year. He noted that the economic data also support the central bank’s hawkish monetary policy outlook.
• The economic calendar is relatively light with Producer Price Index to be released Wednesday and Consumer Price Index to be published Thursday. Madden said that this data might not have much impact on gold prices because there is already a growing expectation that inflation will rise this year.
While the trade wars are expected to have a long-term positive impact on gold, Madden said the effects won’t be felt for a while because there is so much momentum in the U.S. economy.
• In other precious metals, silver fell 0.3 percent to $16.03 an ounce.
Platinum slipped 0.9 percent to $839 per ounce and palladium shed 1.6 percent to $944.72 an ounce.
Reference: Reuters, Kitco
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