Gold hits two-week high as dollar slides

NEW YORK/LONDON — Gold prices hit a more than two-week high on Tuesday, supported by expectations of stronger demand from the physical market and as the dollar fell on fading prospects of an imminent increase in US interest rates.

The dollar sank to a 10-month low against a basket of currencies, making dollar-denominated metals cheaper for holders of other currencies, which could boost demand.

The greenback sank on reduced confidence in US President Donald Trump’s agenda and jitters over hawkish central banks abroad.

Spot gold was up 0.70% at $1,242.41 an ounce by 2:15 p.m. EDT (1815 GMT), having touched $1,244.30, its highest since June 30. US gold futures settled 0.70% to $1,241.90.

“The Senate’s failure to repeal Obamacare has amplified concerns that the Trump economic agenda will be more difficult to implement even though the GOP holds a tenuous majority in Congress,” said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.

“That is pressuring US yields and driving the dollar towards year- long lows which creates a positive environment for gold, which has rallied steadily.”

PRESSURE

Data from consultancy GFMS shows India’s gold imports climbed to an estimated 75 tons in June from 22.70 tons a year earlier. For the first half of the year imports rose to 514 tons, up 161% year on year.

GFMS analysts said the jump was caused by Indian consumers buying ahead of July’s increase in the goods and services tax on gold to 3% from 1.20%.

“We see gold averaging around $ 1,300 over the third quarter,” said ING commodities strategist Warren Patterson.

“Indian imports are rising after the very poor year last year. We expect that trend to continue even with the tax changes.”

Weighing on the dollar is also doubt that the Federal Reserve would be able to raise interest rates again this year, while other central banks including the European Central Bank and Bank of England have signaled a more hawkish bent toward tightening policy.

A move above technical resistance at $1,250 could potentially see gold move back to the $1,28090 highs that was seen twice this year, especially with the Fed certain to be cautious at the July meeting, Mr. Wong said.

High interest rates would reduce demand for non-interest bearing gold.

However, investors are still retreating from physical gold. Holdings of SPDR Gold Trust, the world’s largest gold- backed exchange- traded fund, slipped to 827.07 tons on Monday, down from 828.84 tons on Friday.

Meanwhile the price of silver gained 1.40% to $ 16.29 an ounce after touching a two-week high at $16.34.

Among other precious metals, platinum gained 0.70% to $927.50 while palladium slipped by 0.02% to $864.85. —