Gold hits 4-week low on firm dollar

LONDON: Gold hit four-week lows on Monday as the dollar rose after hawkish comments from a top Fed official but prices were supported by uncertainty created by the start of talks on the terms of Britain’s departure from the EU.

Spot gold was down 0.3 percent at $1,248.7 an ounce at 1338 GMT, up from an earlier $1,247.41, its lowest since May 24. US gold futures fell 0.4 percent to $1,251.6. New York Federal Reserve President William Dudley said that the US inflation is a little low but should rise alongside wages as the labor market improves, allowing the Fed to continue gradually tightening US monetary policy.

The potential for higher rates reinforced the dollar’s uptrend, which when it rises makes dollar-denominated commodities more expensive for holders of other currencies, potentially weakening demand. “The dollar is a large part of what is going on with gold,” said ING commodities strategist Warren Patterson. “I do see some support from uncertainty about the UK government and the start of Brexit negotiations.”

British Prime Minister Theresa May failing to win a parliamentary election earlier this month has, alongside Brexit negotiations starting on Monday in Brussels, fueled political uncertainty. Weighing on gold is a drop in holdings of physically backed exchange traded funds to 55.231 million ounces from 55.654 million ounces last Wednesday when the Fed raised rates and pushed the dollar index to two-week highs.

On the technical front, the first support is around $1,248 near the 100-day moving average and resistance sits at $1,260, near the 55-day moving average, traders said. “There is very strong support at the 200-day moving average, just below $1,240,” one trader said.