Gold rises on weak dollar; investors seek more clarity on trade talks

Safe-haven buying is now a little more fragile after recent developments in US-China trade talks. (Bloomberg pic)

BENGALURU: Gold prices inched up on Wednesday, supported by a weaker dollar on hopes of a deal between the United States and China over a long-drawn trade war, but improved risk appetite capped bullion’s gains.

Spot gold was up 0.2% at US$1,313.43 per ounce as of 0619 GMT, while US gold futures gained 0.2% to US$1,316.60 an ounce.

US President Donald Trump said on Tuesday that he could see letting the Mar 1 deadline for reaching a trade agreement with Beijing slide a little if the two sides were close to hammering out a deal to end their long-drawn trade tussle.

US tariffs on US$200 billion worth of imports from China are scheduled to rise to 25% from 10% if the two sides cannot reach a deal by the deadline, increasing pain and costs in sectors from consumer electronics to agriculture.

“There is very little detail behind some of those (Trump’s) comments. There has been nothing really strong enough to drive any strong conviction (for investors),” said ANZ analyst Daniel Hynes.

However, improved risk appetite limited bullion’s gains, with Asian stocks edging higher to a more than four-month peak.

“The safe-haven buying that we saw earlier in the month is now a little more fragile (after recent developments in trade talks),” Hynes said.

The dollar index, however, suffered against its Asian peers and was marginally lower at 96.66. It shed about 0.4% in the previous session in its worst one-day loss in two weeks.

Many central banks have lowered their economic outlook and changed their attitude towards monetary policies, which has supported gold, analysts at precious metals dealer Wing Fung said in a note.

New Zealand’s central bank was the latest to retain the possibility of a rate cut in the face of rising economic risks.

Investors were also worried after Trump said on Tuesday he was unhappy with a deal struck by congressional negotiators on border security that denied him funds for his US-Mexican border wall.

Standing at US$1,300, gold is getting support from a weaker dollar, but lacks enough momentum, Wing Fung said.

Meanwhile, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.4% on Tuesday. Holdings are down about 3% so far this month after four straight monthly gains.

ANZ’s Hynes said January saw pretty good flows. “Some of those investors take profits and subsequently extract some of those holdings. I don’t see it becoming a longer trade trend,” he said.

Spot palladium rose 0.6% to US$1,411.44 per ounce, after gaining 1.3% in the previous session – its best since Jan 25.

Platinum was little changed at US$786.54 per ounce, while silver inched 0.1% higher to US$15.72.