Gold prices edge higher
London (Sept 3) Gold prices edged higher on the European spot market overnight after a sharp drop in the previous session, but the market was unmoved by news of a ceasefire in Eastern Ukraine.
By the end of the session, gold for September delivery gained 0.4 per cent to $US1,268.90, making up some of the 1.5 per cent lost yesterday.
The losses on Tuesday were largely down to the strength of the US dollar, which rose after strong US manufacturing data. That is likely to increase pressure on the Federal Reserve to withdraw some of its extraordinary monetary stimulus, which makes the dollar a more attractive investment.
"The US dollar hit its highest level [against a basket of currencies] since January after the ISM [manufacturing data] print," ANZ Research said.
As gold is priced in dollars, a stronger US currency makes it more expensive to buy the precious metal, leading to a decline in demand.
News on Wednesday that Ukrainian President Petro Poroshenko had agreed a ceasefire in Eastern Ukraine with Russia's President Vladimir Putin did little to sway the traditional safe-haven asset, with analysts saying the details are unclear.
"It would seem the trading world is becoming weary of misleading headlines and is pushing global problems to one side," David Govett, head of precious metals at Marex Spectron, said.
Traditionally, the gold market sees a seasonal swathe of physical buying at this time of year, particularly from India in the run-up to the Hindu festival of Diwali.
However, with no uptake in physical demand seen so far, analysts believe prices may have further to fall.