Spot gold was down 0.3% at $1,422.40 per ounce, as of 0546 GMT, after hitting its highest since July 3 at $1,428.40.
It rose nearly 1.5% in the previous session as the dollar slipped after weaker-than-expected U.S. housing data increased prospects for an interest rate cut by the Federal Reserve.
U.S. gold futures edged 0.1% lower to $1,421.90 an ounce.
· “A slightly weaker dollar and a clear preference from investors over the last 24 hours drove safe-haven assets higher,” said Michael McCarthy, chief market strategist, CMC Markets.
“From gold’s point of view, it approached a key resistance level around $1,430, and having failed to push through it, it looks like short-term trading investors are taking advantage of gains.”
· The dollar index was down 0.2% against a basket of major currencies on Thursday. It climbed to a one-week peak in the previous session on robust U.S. retail sales, but nudged lower as Treasury yields fell in the wake of weak U.S. housing market data and concerns about the unresolved U.S.-China trade conflict.
Meanwhile, the Fed is widely expected to lower interest rates by 25 basis points at its policy meeting at the end of the month, with some in the market even betting on a 50 basis point cut.
· The Fed reported on Wednesday that the U.S. economy continued growing at a “modest” rate in recent weeks, with consumers continuing to spend and a “generally positive” outlook overall even in the face of disruptions caused by the U.S. trade policy.
· Earlier in the week, U.S. President Donald Trump kept up the pressure on Beijing with a threat to put tariffs on another $325billion of Chinese goods.
“Bullion is likely to see strong support after the Fed’s Beige Book emphasized policymakers’ concern on negative impact of trade uncertainty,” Edward Moya, a senior market analyst at OANDA, said in a note.
· Indicative of sentiment, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.48% to803.18 tonnes on Wednesday from 799.37 tonnes on Tuesday.
· GOLD PRICES RALLY IN ANTI-FIAT TRADE AS US BOND YIELDS, USD TUMBLE
Gold prices rallied over the past 24 hours as the commodity benefited from anti-fiat trade as US government bond yields and the US Dollar declined. The pessimistic mood in global financial markets likely fueled this dynamic as investors coped with the reality that the US-China trade truce is very fragile. Yesterday, President Donald Trump said that he could impose further tariffs against China “if he wanted to”.
XAU/USD TECHNICAL ANALYSIS
Taking a closer at gold prices, the commodity closed at its highest since May 2013 as it attempted to break out of persistent consolidation since late June. But, at this point XAU/USD still has highs to clear above 1433 as negative RSI divergence shows fading upside momentum. This can precede a turn lower, so further technical confirmation ought to be required to argue that this may be upside resumption.
· Hedge fund kingpin Ray Dalio is seeing a case for gold as central banks get more aggressive with policies that devalue currencies and are about to cause a “paradigm shift” in investing.
Dalio, founder of the world’s largest hedge fund, wrote in a LinkedIn post that investors have been pushed into stocks and other assets that have equity-like returns. As a result, too many people are holding these types of securities and likely to face diminishing returns.
“I think these are unlikely to be good real returning investments and that those that will most likely do best will be those that do well when the value of money is being depreciated and domestic and international conflicts are significant, such as gold,” the Bridgewater Associates leader said.
· Among other precious metals, silver was up 0.5% at $16.05 per ounce, after hitting its highest since Feb. 20 at $16.12. The metal was also on track for a fifth consecutive session of gains.
Platinum rose 0.8% to $849.88 an ounce and palladium gained 0.3% to $1,542.49.
Reference: Reuters, Daily FX
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