Gold prices subdued as dollar extends gains

July 13, 2018

New York (July 13)  Gold prices were muted on Friday, stuck in a tight trading range, as the dollar extended rally from the previous session when strong US inflation data and trade war concerns boosted demand for the greenback.

Spot gold was down 0.1 percent at $1,245.54 an ounce, as of 0652 GMT. For the week, the metal was down 0.7 percent.

US gold futures for August delivery slipped 0.1 percent to $1,245.50 an ounce.

“The dollar has been a prime mover of gold prices…Market sentiments have been largely positive on the greenback as investors pivoted from the safe haven asset despite rising geopolitical risks,” said Benjamin Lu, a commodities analyst at Singapore-based broker Phillip Futures, in a note.

The dollar was buoyant near a 10-day peak versus a basket of currencies on Friday, supported by Treasury yields that edged higher on expectations the US inflation rate will rise.

US consumer price data on Thursday showed a steady buildup of inflation that could keep the Federal Reserve on a path of gradual interest rate increases.

A stronger dollar and higher US rates reduce demand for non-interest bearing gold as the metal becomes more expensive for holders of other currencies.

Elsewhere, the European Central Bank will keep rates at a record low for as long as needed to raise inflation, minutes of the bank’s latest meeting showed.

Meanwhile, Most Asian share markets rose on Friday, but China’s markets wobbled as investors braced for the impact of broadening, tit-for-tat Chinese-U.S tariffs.

The United States and China could reopen talks on trade but only if Beijing is willing to make significant changes, US Treasury Secretary Steven Mnuchin said on Thursday.

“The trade war issue is still creating a lot of uncertainty. If the situation continues and we’re not seeing any real movements in gold prices because of it, we might see prices actually move lower,” said Cameron Alexander, an analyst with Thomson Reuters-owned metals consultancy GFMS.

During times of uncertainty gold prices can receive a boost as the metal is widely considered a safe-haven asset but bullion has failed to benefit from recent trade disputes.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, dropped 0.48 percent to 795.19 tonnes on Thursday.

In other precious metals, silver fell 0.1 percent to $15.88 an ounce, after hitting a seven-month low in the previous session.


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