Gold price rises for a second day on a weaker dollar and renewed trade tensions

May 24, 2018

London (May 24)  Gold prices rose for a second session on Thursday, lifted by a weaker dollar, worries about renewed trade tensions and volatile emerging markets.

Spot gold was up 0.3% at $1,296.24 an ounce by 10am GMT, after gaining nearly 0.2% in the previous session. US gold futures for June delivery added 0.5% to $1,295.70 an ounce.

Gold’s safe-haven appeal was burnished after the US launched a national security investigation into car and truck imports that could lead to new tariffs similar to those it imposed on steel and aluminium in March.

"We have a whole host of potential sources of support for gold. Trade spats are recurring, and there’s a focus on troubled emerging markets," Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen, said.

Turkey has been in the spotlight and its lira weakened more than 2% after a huge emergency interest-rate hike failed to stem its problems. "The relief rally in the Turkish lira yesterday seems to have only managed to pause the slide, but not reverse it," Hansen said.

Gold is often seen as a safe investment during times of political and financial uncertainty. Gold was also buoyed from a weaker dollar index, which lost momentum after US President Donald Trump’s threat to impose new tariffs and minutes of the US Federal Reserve’s last policy meeting were seen as dovish. Higher US rates tend to boost the dollar and drag on greenback-denominated gold, but the metal can also be used as a hedge against rising inflation.

Hansen said it was worrying that the positive drivers for gold had not pushed it further towards key levels of $1,300 and $1,305, which need to be broken to resume the upside. "It we get there, that’s going to force a reaction from funds, but we need a spark and so far gold hasn’t managed to break out of its range."

Spot gold has shed 5% since touching $1,365.23 on April 11, the highest in nearly three months.

Among other precious metals, silver gained 0.8% to $16.55 an ounce, platinum climbed 0.9% to $907.70 an ounce, and palladium shed 0.4% to $972.97 an ounce.

On Wednesday, analysts at Standard Chartered said they expected platinum to continue to trade at a discount to both palladium and gold this year.


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