• Gold edged lower on Monday as the dollar held firm on news that China has cancelled trade talks with the United States, with the market also eyeing this week’s U.S. Federal Reserve meeting for guidance on future rate hikes.
• Investors were squarely focused on Sino-U.S. trade tensions, after China cancelled mid-level trade talks with the United States, as well as a proposed visit to Washington by vice premier Liu He originally scheduled for this week.
• Spot gold inched down 0.2 percent to $1,196.17 by 0323 GMT, after falling as much as 1.3 percent on Friday.
• U.S. gold futures were virtually unchanged at $1,200.60 an ounce. Liquidity is expected to be thin during Asian hours as markets in Japan and China are closed for a holiday.
• “The news out of China does seem to be having some negative impact (on gold) with the U.S. dollar cautiously higher and gold a bit lower by extension,” said Ilya Spivak, a currency strategist for Dailyfx.
• “The moves are relatively tepid because much of what is happening was telegraphed earlier and is already priced in to some degree,” Spivak said.
• Last week, China added $60 billion of U.S. products to its import tariff list, retaliating against U.S. duties on $200 billion of Chinese goods that come into effect on Monday.
• Although gold is generally considered to be a safe-haven asset, the months-long trade rift between Washington and Beijing has prompted investors to buy U.S. dollars in the belief that the United States has less to lose from the dispute.
• The dollar rose 0.1 percent against a basket of currencies at 94.276.
• Gold has fallen over 12 percent since a peak in April amid the intensifying trade disputes and as rising U.S. interest rates diminish demand for non-interest bearing bullion.
• Investors are awaiting this week’s Federal Reserve meeting, where the U.S. central bank is widely expected to raise benchmark interest rates and shed light on the path for future rate hikes.
• “Gold traditionally trades poorly ahead of anticipated Fed hike and the dollar will have up ground,” said Stephen Innes, APAC trading head at OANDA.
• Meanwhile, speculators increased their net short position in COMEX gold contracts in the week to Sept. 18, U.S. data showed on Friday.
• Among other precious metals, spot silver was down 0.4 percent at $14.19. Platinum fell 0.5 percent to $822.10, after hitting its highest in six weeks at $838.40 on Friday.
• Palladium fell 0.6 percent to $1,042.65, after hitting five-month highs at $1,056.72 in previous session.
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• Wall Street and Main Street both look for gold prices to rise next week, based on the weekly Kitco News gold survey.
The U.S. Federal Open Market Committee meeting is widely expected to hike interest rates another 25 basis points next week. But that hasn’t deterred analysts, who suggest this is already factored into prices.
Eighteen market professionals took part in the Wall Street survey. Thirteen respondents, or 72%, predicted higher prices. There were two votes, or 11%, calling for lower prices, while three respondents, or 17%, were neutral or looked for a sideways market.
Meanwhile, 374 people responded to an online poll. A total of 215 respondents, or 57%, called for gold to rise. Another 105, or 28%, predicted gold would fall. The remaining 54, or 14%, see a sideways market.
“I think the Fed may moderate forward language, so I continue to be constructive on the gold price,” said Peter Hug, global trading director for Kitco Metals.
Jasper Lawler, head of research at London Capital Group, said that while the price action looks soft, positioning and market sentiment support higher prices. He said if the Federal Reserve maintains its current guidance, then gold will rally, as he would expect the U.S. dollar to weaken.
“After the strong rally we have seen in the U.S. dollar, the market needs something more than Fed’s current steady path for interest rates,” he said. “From a risk/reward standpoint, the gold market looks good at these levels.”
Reference: Reuters, Kitco
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