Spot gold was up 0.3% at $1,420.65 per ounce as of 0353 GMT, after hitting its lowest since July 17 at $1,413.80 in the previous session.
U.S. gold futures were steady at $1,421.30 an ounce.
· “We have geopolitical tensions in Iran, and also we remain very cautious and skeptical about the (U.S.-China) trade negotiations expected to begin next Monday, because plenty of things remain unsolved between the two nations, ” said Margaret Yang Yan, a market analyst at CMC Markets.
“On the other side, the dollar index is rallying which is having a negative impact on gold prices.”
· Uncertainty in the Middle East continued as a U.S. Navy ship took defensive action against a second Iranian drone in the Strait of Hormuz last week, but did not see the drone go into the water, the U.S. military said on Tuesday.
On the trade front, a report said U.S. Trade Representative Robert Lighthizer would travel to Shanghai next week for meetings with Chinese officials to hammer out a deal to end the long-drawn trade tussle between the world’s top two economies.
The dollar extended gains to a five-week high, making gold expensive for holders of other currencies.
· The European Central Bank is likely to at least offer a nod to easier policy at its meeting on Thursday, while the U.S. central bank is widely expected to lower interest rate at its meeting ending July 31.
Futures remain 100% priced for a rate cut of 25 basis points (bps) from the Federal Reserve next week, and even imply an 18% chance of 50 basis points.
· “If the Fed does a 25 bp rate cut next week, I don’t think gold prices will feel any stronger as it has been already priced in,” said Howie Lee, economist, OCBC Bank.
“But if the Fed surprises with a 50 bp cut, that might push gold prices to test the $1,450 level.”
· Meanwhile, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.25% from Monday to 823.13 tonnes on Tuesday.
· Spot gold looks neutral in a narrow range of $1,412-$1,427 per ounce, and an escape from the range could suggest a direction, said Reuters technical analyst Wang Tao.
· Gold will likely average $1,400 for the balance of the year, as stable inflation and decent US economic numbers will keep trades from pricing aggressive easing by the US Federal Reserve, according to Commodity Strategists at TD Securities.
That said, the yellow metal is seen rising to $1,500 by the final months of 2020 on low Fed rate expectations and equity market corrections.
· GOLD TECHNICAL ANALYSIS
Gold prices are probing lower after putting in a Bearish Engulfing candlestick pattern. Negative RSI divergence bolsters the case for a downside scenario. A daily close below trend line support at 1406.62 exposes the July 1 low at 1381.91. Alternatively, an upturn through resistance marked by the 38.2% Fibonacci expansion at 1447.89 targets the 50% level at 1468.27.
· Among other precious metals, silver rose 0.3% to $16.45 per ounce.
Platinum gained 0.5% to $858 an ounce, while palladium eased 0.3% at $1,522.01.
Reference: Reuters, Daily FX
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