Gold firms

LONDON. — Gold edged higher yesterday, supported by a retreat in the dollar as Italian political risk receded, though the prospect of another rise in US interest rates kept a lid on gains.

The metal fell on Friday after stronger than expected US payrolls data shored up expectations that the US Federal Reserve would press ahead with another rate increase at its June meeting.

Gold is highly sensitive to rising interest rates, which lift the opportunity cost of holding non-yielding bullion. They also boost the dollar, in which the metal is priced. Spot gold was up 0,3 percent at $1,296.60 an ounce by 1205 GMT, while US gold futures for August delivery rose by 0,1 percent to $1,300.60.

The interest rate cycle in the United States is outweighing other factors for the moment, said Julius Baer analyst Norbert Rucker.

“Investment demand for gold is just not strong enough to lift the price sustainably,” he said.

“Near term, the US interest rate hiking cycle is driving prices, and everything that goes along with that a rising dollar, the interest rate differential with the euro zone.”

The euro eroded some of last month’s hefty losses to bounce 0,7 percent against the dollar yesterday as political tensions eased in Italy.

Stock markets also strengthened as worries over a potential trade war between the United States and other major economies was overshadowed by a retreat in political risk in Europe and strong US jobs data. Finance leaders of the closest US allies vented anger over the Trump administration’s metal import tariffs on Saturday. Reuters.