October 1, 2019 / 10:47 AM / 19 days ago

PRECIOUS-Gold dips on strong dollar and optimism over trade deal

* Silver hits lowest since Aug. 20 at $16.85

* SPDR Gold holdings fell 0.2% on Monday

* Palladium slips after breaching $1,700 (Updates prices)

By Brijesh Patel

Oct 1 (Reuters) - Gold slid to its lowest in nearly two months as the dollar climbed to a multi-year peak on signs of strength in the U.S. economy while hopes of a breakthrough in the U.S.-China trade dispute dampened interest in the metal as a haven from risk.

Spot gold was down 0.3% at $1,467.29 per ounce at 1145 GMT on Tuesday after touching its lowest since Aug. 6 at $1,458.50. U.S. gold futures were steady at $1,474.40.

“There seem to be some headlines people are reading positively on the trade front, which is also supporting the dollar, so that’s naturally weighing on the gold market,” said OANDA senior market analyst Craig Erlam.

“Price action seen over the past week made the $1,480 support level very vulnerable. Gold broke that level yesterday and it’s capitalising on those moves to push further down. There is room for plenty more declines over the next few weeks.”

The dollar held firm on Tuesday after posting its biggest quarterly gain in more than a year, with encouraging U.S. economic data leading markets to scale back expectations that the U.S. Federal Reserve will cut interest rates in the coming months.

That has weighed on gold because lower interest rates cut the opportunity cost of holding non-yielding bullion.

“(A) less accommodative Fed implies a stronger U.S. dollar and higher U.S. yields, which are the absolute worst bedfellows for gold markets,” AxiTrader market strategist Stephen Innes said in a note.

Bullion has lost nearly $100 since scaling a peak of $1,557 early September, largely owing to an uptick in the dollar.

It is still up 14% this year, with earlier gains driven by an escalation in the U.S.-China trade conflict, concerns over global economic growth and the prospects for monetary easing by central banks.

More positive signs on trade have weighed on the metal of late. The White House dismissed reports that the Trump administration was considering delisting Chinese companies from U.S. stock exchanges as “fake news”, bolstering risk sentiment.

China and the United States are due to resume high-level trade talks in Washington next week.

Indicative of investor sentiment, holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.2% to 920.83 tonnes on Monday.

Elsewhere, palladium fell 0.7% to $1,662.73 an ounce, having hit a record high of $1,700.71 on Monday on a sustained supply deficit of the autocatalyst metal.

Platinum rose 0.3% to $884.94 and silver gained 0.7% to $17.11 after touching its lowest since Aug. 20 at $16.85. (Reporting by Brijesh Patel in Bengaluru Editing by David Goodman)

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