Gold hits more than 6-month low as dollar, stocks recover
london — Gold hit its lowest in more than six months on Tuesday as a sell off in global risk assets eased and the precious metal remained under pressure from the prospect that rising US interest rates will further support the dollar.
Modest gains from Europe’s main bourses relieved nervy investors on Tuesday, after the latest escalation in an increasingly global trade storm pummelled Wall Street and sent China into bear market territory. Rising equities, seen as risky assets, tend to weigh on gold, seen as a safe haven.
The dollar strengthened on growing concerns about an intensifying conflict between the United States and its trade partners, particularly China. A stronger dollar makes dollar-priced gold costlier for non-US investors.
“The dollar (has been) a lot stronger, that’s the main driver here. Also, gold hasn’t seemed to benefit from the (trade) turmoil, so I imagine that’s made some longs throw in the towel,” said Matthew Turner, commodities strategist at Macquarie.
“The question going forward is whether gold will show better reaction to these (trade) uncertainties. I feel it should, but you need to see a turn in the dollar, or some confidence the dollar is not going to keep going up.” Spot gold was down 0.6 per cent at $1,256.45 an ounce, as of 1019GMT, having hit its weakest since mid-December.
US gold futures for August delivery were 0.8 per cent lower at $1,258.40 per ounce.
Gold-backed exchange-traded funds tracked by Thomson Reuters were headed for their weakest month since July 2017, as investors covered losses in equities, commodities and other markets caused by tariff disputes.
“Trade tensions aren’t helping gold at all, there is only one clear trend which is skewed to the downside. By looking at the chart, it appears that bulls have left the town,” said ThinkMarkets chief market analyst Naeem Aslam. Ratcheting up trade tensions, US Treasury Secretary Steven Mnuchin said on Monday that forthcoming investment restrictions from the department will not be specific to China but would apply “to all countries that are trying to steal our technology.” —