Gold steadies near 1-year low
Major equity markets have been pretty robust and the dollar has been strong Marcus Garvey, Commodities strategist, ICBC Standard Bank
london — Gold steadied near one-year lows on Wednesday as the dollar slipped, while lack of clarity over where a brewing trade spat between the United States and Europe is heading kept most markets range-bound.
Spot gold was up 0.6 per cent at $1,231.14 an ounce at 1001 GMT. It touched $1,211.08 last week, the lowest since July last year, for a loss of more than 10 per cent since April 11. US gold futures gained 0.1 per cent to $1,226.20.
A sliding US currency makes dollar-denominated gold cheaper for holders of other currencies, which potentially could boost demand.
European Commission President Jean-Claude Juncker will travel to Washington on Wednesday for talks focused on trade tensions with US President Donald Trump. The US has imposed tariffs on EU steel and aluminium.
“It makes sense that gold has underperfomed. There is a lot of talk about risk off, but major equity markets have been pretty robust and the dollar has been strong,” said Marcus Garvey, commodities strategist at ICBC Standard Bank.
“There is scope for the dollar to ease a bit, which should provide support for gold, though an aggressive rally in the short term is unlikely. From a medium term perspective we think this is a reasonable level to add length (buy).” ICBC expects the gold price to average $1,260 an ounce in the third quarter and $1,300 in the fourth quarter.
Rising investor interest in gold can be seen in the holdings of the largest gold-backed exchange-traded-fund (ETF), New York’s SPDR Gold Trust , which are up more than one percent to 25.803 million ounces since July 18. SPDR holdings have been trending down since April 30, partly due to higher US interest rates, raising the cost of holding gold, which earns no income, interest or dividends and costs money to store and insure.
The US central bank raised interest rates in June for the seventh time since December 2015. Expectations are for two more rises this year.