Gold steadies as weak physical demand, higher US interest rates weigh

NEW YORK/LONDON — Gold steadied on Monday as weak physical demand in top-consuming regions and the expectation of higher US interest rates weigh, despite the bullion-priced US dollar losing steam.

Spot gold lost 0.20% at $1,239.11 per ounce by 1:33 p.m. EDT (1733 GMT).

US gold futures for August delivery settled down $ 1.50, or 0.10%, at $1,239.70 per ounce.

A lower US currency makes dollar-denominated gold cheaper for holders of other currencies, which typically boosts bullion demand.

However, low physical demand in top gold-consuming countries China and India and the continued expectation of the US Federal Reserve to raise interest rates pressured bullion, traders said.

“It seems the second-quarter Chinese figures are putting a damper on the metals,” said George Gero, managing director of RBC Wealth Management.

‘INVESTORS MAY FAVOR GOLD’

China’s economy expanded at a slower pace in the second quarter as Beijing’s efforts to contain debt hurt activity, while June factory output growth weakened to a two-year low.

India’s gold imports fell for a sixth month in June to 44 tons as a drop in the rupee lifted local prices to their highest in nearly 21 months, curtailing demand.

“Indian and China retail consumption has been hindered by depreciating local FX,” Citi analysts said in a note.

“Investors may favor gold again, especially if trade friction rises further and becomes a more sizeable threat to economic growth and to the decade- long equity market bull run.”

The US dollar fell as investors pared back long bets on the greenback and rebalanced positions ahead of Fed Chairman Jerome Powell’s first congressional testimony on Tuesday. He is expected to reiterate the Fed’s gradual monetary policy tightening.

Gold does not earn any interest or dividends and costs money to store and insure.

Meanwhile, holdings for the largest gold- backed exchange traded- fund, New York’s SPDR Gold Trust, have fallen more than eight percent since late April to less than 26 million ounces, showing fading investor interest in bullion.

Among other precious metals, silver lost 0.10% at $15.77 per ounce. Platinum slipped 0.20% at $824.10 an ounce. Palladium declined 2.2% at $916.47 an ounce, earlier dipping to $914.75, its lowest since April 9. —