Gold rises for 2nd day on Asia buying, dollar drop

Surging greenback continues to put pressure on precious metal

Gold prices climbed for a second day on Tuesday, buoyed by an easing US dollar and physical buying in Asia.

Spot gold was up 0.3 percent at $ 1,217.35 an ounce by 2: 28 pm Beijing time. The previous day, the precious metal advanced 0.4 percent to snap three sessions of losses.

US gold futures were up 0.64 percent at $ 1,217.50 per ounce, after earlier rising as high as $ 1,220.90.

“Gold prices have factored in the December [ US rate hike] move. Now it is a matter of bargain- hunting,” said Spencer Campbell, general manager with Kaloti Precious Metals in Singapore. “We are seeing a lot of activity in Southeast Asia. The drop in prices and inverse pricing against the local currency are driving the buying.”

Gold has fallen more than $ 120 an ounce from its post- US election peak as US Treasury yields posted their biggest two- week rise in more than five years and the dollar shot higher.

But the US dollar weakened on Tuesday, supporting bullion.

The dollar index, which measures the greenback against a basket of major currencies, slipped 0.15 percent to 100.910, falling further after snapping a 10- day streak of gains on Monday.

“Gold kept its head above water, with technical- based buying supporting the market. However, with the market increasing bets on a December rate hike, this buying is unlikely to persist in the short term,” ANZ analysts said in a note.

Gold is highly- sensitive to rising interest rates, which lift the opportunity cost of holding non- yielding assets such as bullion, while boosting the dollar, in which it is priced.

“We still expect gold to struggle against a host of bearish elements that remain arrayed against it, including a stronger dollar, soaring equity markets and the prospect of further rate hikes that could follow the widely expected increase slated for next month,” INTL FCStone analyst Edward Meir said.

The world’s largest gold- backed exchange- traded fund, SPDR Gold Trust, said its holdings fell 0.71 percent to 908.77 tons on Monday. Holdings have fallen 3.6 percent so far this month.

Goldman Sachs on Monday lowered its three- and six- month gold price forecasts to $ 1,200 per troy ounce, stating that downside risks remain from potential physical ETF liquidation.

Spot gold may test resistance at $ 1,222 per ounce, a break above which could lead to an increase to $ 1,235, according to Reuters technical analyst Wang Tao.