Gold hit one-month low as risk sentiment improved

BENGALURU: Gold inched higher on Tuesday, supported by global political uncertainties, after touching a five-week low earlier in the session as a key US Federal Reserve official reaffirmed the central bank’s hawkish stance on interest rate hikes.

Risk aversion due to Brexit, concerns over US President Donald Trump’s ability to carry out financial reforms, election results in Europe and Middle East turmoil have provided some support for gold, said Mark To, head of research at Hong Kong’s Wing Fung Financial Group.

“We can see things are getting more complicated and investors have to take some time to put things into context,” To said. Spot prices touched a low of $1,242.61 an ounce early in the session, the weakest since May 17, after New York Fed President William Dudley reinforced that recent weak data is unlikely to derail plans to keep raising interest rates.

Gold is used as an alternative investment during times of political and financial uncertainty.

British and EU Brexit negotiators agreed how to organise talks on Britain’s divorce at a first meeting in Brussels on Monday, where both sides stressed goodwill but also the huge complexity and tight deadline.

Late Monday, Chicago Fed President Charles Evans said it may be worthwhile for the US central bank to wait until year-end to decide whether to raise rates again and that it should move slowly to raise them and trim its massive bond portfolio.

“Mixed US dollar trade provided some respite for gold during Asian trade, with modest physical interest out of the region evident underneath $1,250, however, not to the extent we expected we would see,” trader Sam Laughlin said.