Published: Wed, May 16, 2018
Business | By Tara Barton

Gold prices inch 0.2% higher on floppy dollar effect

Gold prices inch 0.2% higher on floppy dollar effect

Israeli troops shot dead dozens of Palestinian protesters on the Gaza border on Monday when the high-profile opening of the USA embassy to Israel in Jerusalem by the Trump administration raised tension to boiling point after weeks of demonstrations.

Among the S&P industry groups, the rate-sensitive real estate space ended at the bottom of the standings with a 1.7% loss, including a 3.8% rout in the iShares U.S. Home Construction ETF.

Spot gold was up 0.1% at US$1,290.86 an ounce at 1104 GMT, while U.S. gold futures for June delivery were flat at US$1,290.30.

U.S. gold futures for June delivery were slightly changed at $1,320.50, though the weakness in dollar appears to be helping gold prices in Asia, a Hong Kong-based trader said.

But gold investors were fixated on the dollar, which rose versus a currency basket as 10-year USA bond yields shot above 3 percent, sending borrowing costs higher in a number of other countries.

Gold prices recovered slightly due to short-covering on Wednesday, after Tuesday's slide to the lowest level this year, thanks to surging USA bond yields and a stronger dollar. "Therefore it has not become a big driver for gold", said Helen Lau, analyst at Argonaut Securities.

A Federal Reserve official this week backed the case for further interest rate hikes in the United States, saying inflation had not yet reached the USA central bank's 2 percent goal in a sustained way.

Gold prices inch 0.2% higher on floppy dollar effect
Gold prices inch 0.2% higher on floppy dollar effect

While global political tension continued to provide safe-haven support to the metal, investors said the main price drivers would likely remain a stronger dollar and rising U.S. interest rates.

Gold traded sideways in Asian hours on Tuesday, buoyed by safe-haven demand with upside potential restricted by a firm dollar and outlook for higher interest rates in the United States.

Gold futures on the COMEX division of the New York Mercantile Exchange dropped Tuesday to lowest settlement of year, as US dollar rallies, Treasury bonds yield jumps.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.62 percent to 857.64 tonnes on Friday.

Technical and momentum indicators suggested gold could fall to around US$1,278, said analysts at ScotiaMocatta.

In other precious metals, silver was up 0.4 per cent at $16.29 per ounce after falling about 1.6 per cent on Tuesday in its biggest one-day percentage decline since April 23.

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