Gold price edges off two-week low as dollar retreats
London (May 27) Gold recovered some lost ground on Wednesday as the dollar retreated after its biggest daily rise in two years, but prices remained under pressure from expectations that a US rate increase may come soon.
Gold fell 1.7% on Tuesday, its biggest one-day drop this month, after firmer data supported the view that the US Federal Reserve may raise interest rates this year.
That would lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
Spot gold was up 0.1% at $1,187.90 an ounce at 9.40am GMT, while US gold futures for June delivery were down 50c/oz at $1,186.40.
"We’re seeing a bit of a reversal, with gold prices a little bit higher in a bounce-back after the decline yesterday," LBBW analyst Thorsten Proettel said.
"Speculators are playing the scheme where good, positive news from the US economy (that) gives information about interest rate hikes is bad for gold, and the other way around."
Positive data on US business investment spending, consumer confidence and house prices on Tuesday were in line with Fed chairwoman Janet Yellen’s comments last week that indicated the US central bank is poised to raise rates later this year.
That boosted the dollar and weighed on shares.
A string of reversals from the previous day’s sharp moves marked global financial market trading on Wednesday, with stock markets and crude oil rising and the US dollar retreating.
Former US Federal Reserve chairman Ben Bernanke emphasised on Wednesday that a move to raise US rates should be viewed as a positive sign for the world’s largest economy.
Tuesday’s gold price drop did little to stimulate demand from price-sensitive consumers in Asia, dealers said.
"Following the overnight rout, we were expecting to see some interest from Asia during today’s session, however, aside from a moderate level of support courtesy of Chinese trade, interest was generally muted," MKS said in a note.
Silver was up 0.1% at $16.71/oz, while platinum was flat at $1,122.50/oz and palladium was up 0.3% at $782.50/oz.
Silver remains the best-performing precious metal this month, despite Tuesday’s 2.4% drop, up 3.4% since the end of April in its biggest monthly rise since January.
Source: Reuters
