Gold hits low as trade comments lift stocks, dollar

Tuesday, 22 May 2018 00:00 - - {{hitsCtrl.values.hits}}

London (Reuters): Gold marked a new low for the year yesterday after US Treasury Secretary Steven Mnuchin’s declaration that a trade war between China and the United States was “on hold” helped boost appetite for higher risk assets such as stocks and the dollar.

Buoyancy in US Treasury yields also weighed on appetite for non-interest bearing assets such as bullion, analysts said.

Spot gold fell to its lowest since late-December 2017 at $1,281.76 an ounce, and by 1205 GMT was down 0.5% at $1,285.17 an ounce. US gold futures for June delivery were 0.5% lower at $1,284.50.

“The dollar’s riding high, and the 10-year yield has broken above 3.05% for the first time since 2011,” Mitsubishi Analyst Jonathan Butler said. “This is taking place at a time when we’re very close to all-time highs in the US equity markets, and all of this positive news about jobs, about productivity, is feeding into a move towards risky assets.” He said gold could benefit from safe-haven buying in the long run if that exuberance loses steam and inflation pressures mount. But, he added: “It’s possible that we might see a further correction in the very short term. That will, of course, depend on the news flow and whether the dollar can hold onto its gains.”

Gold prices fell below the psychologically important level of $1,300 an ounce last week, and posted the first weekly close below their 200-day moving average since late-December.

A stronger dollar makes assets priced in the US currency more expensive for holders of other currencies, while a bounce in yields had added to pressure on gold.

The metal is also being weighed down by expectations that US Federal Reserve will lift US interest rates again next month, further hurting demand for non-yielding assets.

Think Markets Chief Market Analyst Naeem Aslam said investors were now looking ahead to this week’s meeting of the Federal Open Market Committee, which sets rates. “If the Fed doesn’t tame its hawkish stance, we would expect more weakness in the gold price,” he said.Hedge funds and money managers cut their net long position in COMEX gold contracts by 21,294 contracts to 31,327 in the week to 15 May, data showed last Friday.

Among other precious metals, platinum was down 0.2% at $881 an ounce, after also marking a fresh low for the year in earlier trade at $873.50.

Silver was down 0.2% at $16.39 an ounce, while palladium, the most industrial of the major precious metals, was up 1.2% at $974.70 an ounce, bucking the falling trend.