Gold inches down as dollar recovers after US Govt. shutdown

Reuters: Gold prices inched down yesterday as the dollar regained strength after slipping earlier on a US government shutdown, with investors on wait-and-watch mode.

Spot gold fell 0.1% to $1,329.75 an ounce by 0715 GMT. 

Spot gold fell 0.5% last week, its first weekly decline in six weeks.

US gold futures were down 0.3% at $1,329.30. 

Funding for federal agencies ran out at midnight on 19 January, and was not renewed amid a dispute between US President Donald Trump and Democrats over immigration. Republican and Democratic leaders of the US Senate held talks on 21 January seeking to break an impasse that has kept the US government shut down for two days, but it was unclear if a deal could be struck to reopen federal agencies by the start of the work week.

 “US shutdown should not affect gold too much ... it’s a political issue more than an economic one,” a Hong Kong-based bullion trader said. “Physical demand is almost non-existent since early this year and that’s a matter of worry. We need some sell-off before physical demand will come back in.”

The dollar index, which measures the greenback against a basket of currencies, was up 0.1% at 90.626, after falling as much as 0.5% to 90.155.

“While the shutdown of government services in the US is not expected to last too long, traders are getting increasingly nervous about its impact on the economy,” ANZ analysts said in a note. “Another strong week on equity markets is also starting to raise concerns about stretched valuations, which are also pushing some investors into the gold sector.”

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.70% to 846.67 tons on 19 January. SPDR holdings rose over 2% last week, their best week since week-ending 3 September 2017. 

Adding a touch of bullishness to gold was data from the US Commodity Futures Trading Commission (CFTC), which showed that hedge funds and money managers had raised their net long position in COMEX gold contracts in the week to 16 January.

Spot gold may revisit its 18 January low of $1,323.70 per ounce, as suggested by its wave pattern and a Fibonacci retracement analysis, according to Reuters technical analyst Wang Tao. 

Among other precious metals, spot silver was down 0.2% to $16.97. Platinum was mostly unchanged at $1,012, after touching its highest since 8 September 2017 at $1,015.20 on Friday.

Palladium was up 0.1% at $1,106 an ounce. It touched record highs last week at $1,138. Flows of palladium out of UK stocks to Hong Kong are picking up as demand from Asian industry grows, pointing to a tightening market that could keep record-high prices on the boil.