• Gold prices rose on Wednesday along with equities as the U.S. dollar softened, with markets showing little worry over the latest escalation in the U.S.-China trade war.
Spot gold climbed 0.3 percent to $1,201.72 an ounce by 0455 GMT.
U.S. gold futures were up 0.3 percent at $1,206.50 an ounce.
• The news on tariffs did not help the U.S. dollar and parallel gold strength likely reflects the markets having had this outcome mostly priced in since last week, said Ilya Spivak, a currency strategist for Dailyfx.
China and the United States plunged deeper into their trade feud on Tuesday after Beijing added $60 billion in U.S. products to its import tariff list in retaliation for President Donald Trump’s planned levies on $200 billion in Chinese goods.
“Also, last week’s modest recovery in emerging market assets helped push up stocks more broadly, which trimmed haven demand for the dollar,” Spivak said.
• Still, gold prices have declined about 12 percent since April, hurt by the intensifying U.S.-China trade dispute and on rising U.S. interest rates.
• Investors have been buying the dollar in the belief the United States has less to lose from the dispute. But a spot of weakness in the dollar may indicate investors are starting to worry about the impact of the tariffs on the U.S. economy.
• The dollar index, which measures the greenback against a basket of major currencies, was down 0.1 percent.
• “People are following the U.S. dollar and looking for clues from the upcoming Federal Reserve meeting later this month,” said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.
• Bond traders are increasing bets that the Federal Reserve will raise U.S. short-term interest rates into 2019 as the jobs market tightens and with inflation seen climbing above its 2 percent goal.
• “For the short and medium-term, gold is likely to trade range bound between $1,190-$1,210. There is some physical demand in Shanghai and Hong Kong,” Fung said.
• Spot gold may retest a resistance at $1,202 per ounce, with a good chance of breaking above this level and rising towards $1,208, according to Reuters technical analyst Wang Tao.
• Meanwhile, liquidations in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, continued as holdings fell 0.3 tonnes to 742.23 tonnes on Tuesday.
• SPDR holdings are down over 4 million ounces since a peak in April.
• Among other precious metals, spot silver rose 0.3 percent to $14.16 an ounce.
• Platinum gained 0.9 percent to $816.70, after hitting its highest since Aug. 13 at $817.90 in the previous session.
• Palladium was up 0.5 percent at $1,014.50, after marking its highest since June 14 at $1,015.
• Although gold prices have been stuck in a rut around $1,200 an ounce for five weeks, one precious-metals analyst sees potential for the yellow metal as U.S. investors are ignoring growing domestic political and inflationary risks.
In a report released late Monday, Jonathan Butler, precious-metals strategist at Mitsubishi Corp., noted that the U.S. mid-term elections are less than two months away and the results could have implications for the U.S. dollar and in turn gold prices.
“It is no secret that Donald Trump’s presidency hinges on the mid-term elections – if the Democrats gain control of the House of Representatives in November, impeachment proceedings could begin in fairly short order,” Butler said. “The political uncertainty engendered by an impeachment could see the dollar lose ground and give some support to gold.”
Aggregated polling data shows that Democrats have a more than eight-point lead over Republicans in a generic congressional vote ahead of the Nov. 6 election.
“With the market becoming one-sided towards risk assets in the current economic climate, there is a danger that the current U.S. political risks will be overlooked,” Butler said.
The second factor Butler sees supporting gold prices through the rest of the year is inflationary pressures. He noted that inflation is already at the Federal Reserve’s 2% target as the economy continues to grow and the labor market tightens.
“It would not take much for inflation to outstrip nominal rates, increasing the attractiveness of gold as an inflation hedge,” he said. “The key question is if U.S. growth can remain on track, allowing President Trump to claim electoral credit for his tax cuts and for the Fed to maintain a steady rate hike path that will keep inflation in abeyance.”
Reference: Reuters
Thai
Eng