Gold dips on Ukraine cooperation signs, stronger dollar
London (July 22) Gold fell on Tuesday as shares rose on speculation tensions between Russia and the West would ease after signs of cooperation from pro-Russian rebels over the downed Malaysian plane, while a stronger dollar ahead of U.S. data also weighed.
A train carrying the remains of many of the 298 victims of the plane disaster last week arrived in Ukrainian government territory on Tuesday as a separatist leader handed over the plane's black boxes to Malaysian experts.
Spot gold slipped 0.4 percent to $1,306.10 an ounce by 1125 GMT, reversing the previous session's modest gains, while U.S. gold futures for August delivery were down 0.6 percent at $1,306.20 an ounce.
Gold jumped 1.4 percent last Thursday as some investors sought protection against any drop in equities after news of the loss of the Malaysian passenger plane.
News of the jet disaster, coupled with the prospect of harsher Western sanctions on Russia and increased violence in the Middle East after Israel's ground offensive in Gaza, have contributed to keep gold prices above $1,300 an ounce in the past week.
However, investors sold some positions in bullion after the metal snapped a six-week winning streak last week. Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 1.8 tonnes to 803.34 tonnes on Monday.
Gold was pressured by a rebound in European shares and a firmer dollar, which rose 0.2 percent against a basket of main currencies ahead of U.S. consumer prices data at 1230 GMT.
"An increase in U.S. inflation in the past few months has brought this issue back to the forefront of gold investors' concerns, despite - in fact partly because of - the Fed Chairwoman dismissing it as 'noise'," Macquarie analyst Matthew Turner said.
"The data is noisey, but if today's June CPI release shows another increase investors might decide they can still discern the underlying tune."
The metal would benefit from higher inflation as it is often considered as an hedge against it, but this could also speed up the pace at which the Federal Reserve raises U.S. interest rates, which would be ultimately negative for the metal.
Signs of escalating violence in Israel kept investors cautious. The United States, alarmed by escalating civilian bloodshed in an Israeli offensive in the Gaza Strip, took a direct role in efforts to secure a ceasefire on Monday, as the Palestinian death toll jumped to more than 500.
Some traders said sluggish physical demand could keep in check any rally in gold or even result in some near term losses.
Physical demand across Asia has been subdued in the last few months, as buyers take a pause after avid purchases earlier on due to a drop in prices.
On the Shanghai Gold Exchange, local gold prices were on par with London rates on Tuesday, indicating muted buying interest in the top consumer of gold, China.
Palladium fell 1 percent at $865.60 an ounce. Platinum was unchanged at $1,480.74 an ounce and spot silver fell 0.4 percent to $20.81 an ounce
Source: Reuters
