Mubasher: Gold prices fell on Tuesday as risk sentiment improved on prospects that China and the US may be reaching a trade deal, while the US dollar recovered from a two-month-and-a-half low hit in the prior session.
By 8:25 am GMT, US gold futures fell 0.43% to $1,284.30 per ounce, while spot gold dropped 0.49% to $1,282.88 per ounce.
“Because of improved investor sentiment, gold is coming off its highs and may have to stay around the current levels,” Hong Kong-based Wing Fung Precious Metals research head Mark To told Thomson Reuters.
“The market has been troubled by uncertainties around trade war and interest rate hikes, [but] now most of the stake holders, including the authorities in US, China and Fed, are trying to cooperate and put up a positive tone and create a stable environment for investors,” Mark To said.
Investors hoped that the world’s two largest economies may be reaching a trade deal after positive remarks from US Commerce Secretary Wilbur Ross.
The US and China could strike a trade deal that “we can live with” as officials from both sides were in negotiations, attempting to put an end to the trade conflict between Washington and Beijing, Secretary Ross said late Monday.
“A lot of people had gone long in gold as they bet that economic growth in US and China might slow down due to the trade war,” Mumbai-based Nirmal Bang Commodities research head Kunal Shah told Reuters, adding that “if there are positive outcomes, there could be some profit taking [in the precious metal].”
Moreover, the US dollar index rose 0.25% to 95.9070, bouncing off the lowest level in two months and a half reached in the previous session, after Federal Reserve chair Jerome Powell on Friday hinted that the central bank would apply stakes on its multi-year monetary tightening cycle.
The yellow metal is trading lower as the dollar indicated early signs of recovering from its bout of weakness, OANDA Asia and Pacific trading head Stephen Innes told Reuters.
Nevertheless, optimism around US-Sino trade tensions would “temper expectations [for the greenback],” Innes added.
It is worth noting that a weaker US dollar makes dollar-denominated bullion more affordable for investors holding other currencies.
