Gold price hits 4-week low on firm dollar, Brexit talks lend support

London (June 19)  Gold hit four-week lows on Monday as the dollar held firm and the market waited for comments from a top Federal Reserve official on U.S. monetary policy, but prices were supported by the start of talks on the terms of Britain's departure from the European Union.

Spot gold was down 0.2 percent at $1,251 an ounce by 0852 GMT, up from an earlier $1,248.63, its lowest since May 24. U.S. gold futures fell 0.3 percent to $1,252.5.

New York Fed President William Dudley is due to take part in a roundtable with local business leaders later on Monday.

Dudley's comments, if hawkish, could reinforce the dollar's uptrend, which when it rises makes dollar-denominated commodities more expensive for holders of other currencies, potentially weakening demand.      

"The dollar is a large part of what's going on with gold," said ING commodities strategist Warren Patterson. "I do see some support from uncertainty about the UK government and the start of Brexit negotiations."

British Prime Minister Theresa May failing to win a parliamentary election earlier this month has, alongside Brexit
negotiations starting on Monday in Brussels, fuelled political uncertainty.            

Weighing on gold is a drop in holdings of physically-backed
exchange traded funds to 55.231 million ounces from 55.654
million ounces last Wednesday, when the Fed raised rates and
pushed the dollar index        to two-week highs.
    On the technical front, support for gold kicks in at $1,248,
near the 100-day moving average, and resistance sits at $1,260,
near the 55-day moving average, traders said.
    "There's very strong support at the 200-day moving average,
just below $1,240," one trader said.
    Elsewhere, palladium        was up 1.5 percent at $873.65 an
ounce. Earlier this month the metal used to make autocatalysts
for gasoline-fuelled cars hit a 16-year high at $914.70 an ounce
as the market fretted about shortages in the near term.
    But analysts say palladium's gains of more than 25 percent
so far this year may not be justified given slowing auto sales.
    "There are some concerning signals from the two largest
gasoline (palladium) auto markets, the U.S. and China," ICBC
Standard Bank analysts said in a note.
    "The pace of sales growth in both countries has slowed
sharply this year. There are a several reasons why, namely
credit, a maturing business cycle, and reduced incentives."
    U.S. passenger car sales fell 9.8 percent in May from a year
earlier. In China the drop was 0.1 percent, but expectations are
for further falls over coming months.                         
Silver gained 0.3 percent to $16.63 an ounce and platinum slid 0.2 percent to $922.50 an ounce.

Source: Reuters