Gold price dips on strong dollar, optimism over trade deal
New York (Oct 1) - Gold slid to a near two-month low on Tuesday 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 0.4% at $1,466.58 per ounce as of 1007 GMT, after touching its lowest since Aug. 6 at $1,458.50 earlier in the session. U.S. gold futures were flat at $1,472.90.
"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 last 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 the Federal Reserve will cut interest rates in coming months.
That has weighed on gold, as a reduction in interest rates would have cut the opportunity cost of holding the non-yielding metal.
"(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 to due to an uptick in the U.S. dollar.
It is still up 14% this year, with earlier gains driven by an escalation in the U.S.-China trade tensions, concerns over global economic growth and prospects of 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 next week in Washington.
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 0.4% to $1,667.33 per ounce, having scaled a record peak of $1,700.71 on Monday on a sustained supply deficit of the autocatalyst metal.
Platinum rose 0.4% to $885.23 an ounce. Silver gained 0.4% to $17.06, having hit its lowest since Aug. 20 at $16.85 earlier in the session.
Reuters
