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Gold steady but lacks upside momentum

Gold steady but lacks upside momentum

LONDON, July 12: Gold steadied on Thursday as the dollar came off the boil, though the market lacked direction and seemed unable to capitalise on escalating trade tensions, reports Reuters. Stock markets and commodities regained some poise after a turbulent session on Wednesday when the United States ratcheted up trade war threats on China, while the dollar held at a nine day high. The dollar’s failure to push ahead, especially against the euro, is viewed by some market watchers as a sign it may have peaked for now as the Federal Reserve might slow its cycle of rate increases if stocks fall sharply. A weaker dollar makes dollar-priced gold cheaper for non-U.S. investors who make up the bulk of gold buyers. “The (gold) market is lacking direction and very technical in its characteristics,” said Alasdair Macleod, head of research at Goldmoney.com. Looking ahead however, he said: “Gold could go marginally better. There are signs that the U.S. economy may be slowing down a bit and if that’s so, we can expect the Fed to take its foot off the interest rate pedal a bit.” Spot gold was up 0.2 percent at $1,244.95 at 1021 GMT. In the previous session, it slipped 1 percent to hit its lowest in over a week at $1,240.89. U.S. gold futures for August delivery were flat at $1,244 an ounce. Investors are looking to U.S. consumer inflation data due later for further clues on the Fed rate outlook, with the biggest annual increase in 6-1/2 years in June U.S. producer price setting the scene for an upside surprise. Elsewhere, focus was still on what the next steps in the tit-for-tat trade conflict might be. China has accused the United States of bullying and warned it could hit back, although the form of retaliation is not yet clear. Investors often turn to bullion as a safe haven in times of political uncertainty, but have not done so this time around. “We cannot understand the weakness of the gold price in view of the risks – especially the trade war. However, if gold falls below last week’s low, the psychologically important $1,200 mark could be tested,” said Commerzbank in a note. Silver was 0.7-percent higher at $15.85 an ounce. Earlier in the session it fell to its lowest since mid-December at $15.72 an ounce. Platinum was up 0.3 percent at $827.25 an ounce, after falling to a more than one week low at $821.25 earlier, while palladium was 0.3 percent higher at $938.98 per ounce. Earlier, gold prices slipped on Wednesday as U.S. threats of tariffs on an additional $200 billion of Chinese goods pushed safe-haven flows to the dollar and dashed hopes that Washington will eventually step back from the escalating row, reports Reuters U.S. President Donald Trump detailed overnight a list of Chinese products that could face 10 percent tariffs. The clock now starts ticking on a two-month period of public comment before the levies are imposed. The news sent the U.S. dollar to an 11-month high versus the yuan and hit the Australian dollar, but left the euro largely unmoved. A strong greenback makes U.S. dollar-priced gold costlier for non-American investors. “Gold options keep getting higher and higher, which means people are positioned for prices to rise. It tells us there is overhanging positive sentiment to gold but right now the money is sitting on the sidelines,” ING analyst Oliver Nugent said. Spot gold was 0.5 percent lower at $1,249.74 an ounce at 1144 GMT. In the previous session, bullion hit a one-week low at $1,246.81. U.S. gold futures for August delivery were 0.5 percent lower at $1,249.80 an ounce. The news of more possible U.S. tariffs on China comes days after Washington imposed 25 percent duties on $34 billion of Chinese imports, and Beijing responded immediately with matching levies on the same amount of U.S. exports to China. Spot gold may break support at $1,247 per ounce and fall more towards the next support at $1,237 as it has completed a bounce from the July 3 low of $1,237.32, Reuters technicals analyst Wang Tao said. “When trade-war risk escalates, investors run for cover ... I always have gold as a hedge but it’s been more challenging to have this view when the U.S. dollar is attracting haven flows,” said Stephen Innes, APAC trading head at OANDA. Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Shares, fell 0.22 percent to 799.02 tonnes on Tuesday. In the wider markets, global stocks fell while metals slumped to their lowest in a year on fears of a trade war. Falling equities, seen as risky assets, usually help gold, a traditional safe haven. Silver shed 0.9 percent to $15.91 an ounce and platinum was 0.8 percent lower at $835.25 per ounce. Earlier in the session, both metals fell to their lowest since July 3. Palladium was down 0.8 percent at $934.14 per ounce, after falling to a two-week low at $931.75.

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