Gold falls as tariffs, rate hike buoy dollar

US gold futures are down 0.5% at $1,197.40 and the dollar is up 0.2%

Gold prices faltered yesterday, under pressure from a stronger dollar as the US Federal Reserve reaffirmed intentions to raise interest rates and trade tariffs between the US and China kicked in.

The precious metal failed to confirm its brief break through $1,200 on Wednesday, a key psychological level, as the dollar resumed its ascent.

Spot gold was down 0.3 per cent at $1,190.27 an ounce at 1225 GMT. Prices hit their highest since Aug. 13 at $1,201.51 in the previous session.

Minutes of the Fed’s latest policy meeting suggested the central bank is on course to further raise interest rates after two hikes this year, denting demand for non-interest yielding gold.

“Gold has fallen victim to another round of dollar strength,” said Saxo Bank analyst Ole Hansen.

“The market needs to see that the trajectory of US rate hikes is beginning to slow and that was not the signal in Fed minutes yesterday.”

Meanwhile, trade tariffs imposed by the US and China on each other kicked in yesterday, benefiting the safe-haven US currency, even as mid-level officials from both sides resumed talks in Washington.

Amid shocks to the global financial system caused by the ongoing trade war, investors

Signalling further negative sentiment in gold was a record of net shorts in COMEX gold contracts.

have opted for the safety of US

Treasuries and the US currency, making dollar-denominated gold more expensive for holders of other currencies. This, along with higher US interest rates this year, has sapped demand for the precious metal. US gold futures were down 0.5 per cent at $1,197.40 The dollar was up 0.2 per cent against a basket of six major currencies.

Markets are now keeping a close eye on the Fed’s economic symposium in Jackson Hole, Wyoming, starting today for any change in its stance, especially after the US President Donald Trump’s attack on its monetary policy this week.

Signalling further negative sentiment in gold was a record of net shorts in COMEX gold contracts. However, gold should be supported by physical buying due to seasonal factors and robust core demand from the world’s largest consumers China and India, a note from UBS said.

Spot silver was down 0.8 per cent to $14.61, having touched a one-week low of $14.49 an ounce. Platinum fell 1 per cent to $783.90 an ounce.