Gold inches lower as strong eq­ui­ties weigh

Fur­ther dovish Fed tone and weaker global growth data could pro­pel metal

Gulf News - - Markets | Jobs & Careers -

Gold inched lower on Fri­day, hav­ing posted its big­gest daily de­cline in two weeks in the pre­vi­ous ses­sion, as the im­pact of a weak dol­lar was off­set by gains on Wall Street.

The metal had bro­ken be­low the key psy­cho­log­i­cal level of $1,300 on Thurs­day to hit a one-week low due to sharp gains in the dol­lar.

“The dol­lar strength re­ally hurt pre­cious met­als and we’re see­ing some of that re­verse with most cur­ren­cies run­ning a lit­tle higher ver­sus the dol­lar,” said Chris Gaffney, pres­i­dent of world mar­kets at TIAA Bank.

“We’ve got tame in­fla­tion, the trade sit­u­a­tion is get­ting re­solved and Brexit looks like it’s go­ing to be pushed down the road. So right now in­vestors don’t have any in­cen­tive to buy gold,” Gaffney added.

US stocks climbed back to near record highs on Fri­day after the largest US bank, JP­Mor­gan Chase & Co, soothed wor­ries that the first-quar­ter earn­ings sea­son would pour cold wa­ter on Wall Street’s big rally back from last year’s slump.

Spot gold edged 0.1 per cent lower to $1,290.71 per ounce as of 3:30pm EDT (1930 GMT).

US gold fu­tures set­tled 0.1 per cent higher at $1,295.2 an ounce.

Mean­while, the dol­lar in­dex was down 0.2 per cent against a bas­ket of lead­ing cur­ren­cies and was headed for its first weekly de­cline in four weeks, keep­ing gold from falling fur­ther.

A fur­ther dovish tone from the US Fed­eral Re­serve and weaker global growth data could pro­pel gold higher, Gaffney said, but that for now, it was go­ing to strug­gle to get back above the $1,300 level.

Cen­tral bank buy­ing

Early in the week, bul­lion re­ceived sup­port from in­creased buy­ing by cen­tral banks and a dovish view from the Euro­pean Cen­tral Bank as well as min­utes from the US Fed. How­ever strong US eco­nomic data on Thurs­day boosted the dol­lar and trig­gered a sell-off in gold.

Data showed weekly US job­less claims fell to the low­est in nearly half a cen­tury and pro­ducer prices in­creased the most in five months in March.

“Given the marked de­cline we ex­pect in US eq­ui­ties this year, we sus­pect that safe­haven as­sets will soon surge,” Cap­i­tal Eco­nom­ics an­a­lysts said in a note.

“We think gold in­vest­ment should be strong, par­tic­u­larly in the form of ex­change-traded fund buy­ing. As a re­sult, we ex­pect the price of gold to rally to $1,400 per ounce by end-2019.”

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