Global gold prices retreat from 1-year high as dollar gains ground
Gold prices fell early on Monday after hitting its highest in over a year in the previous session, as the dollar recovered from last week’s lows and as lack of geopolitical developments dented safe-haven appeal.
Spot gold was down 0.8% at $1,335.10 an ounce by 12.35pm. It rose to $1,357.54 on 8 September, the highest since 16 August, 2016. US gold futures for December delivery were also down 0.9% at $1,339.40 an ounce.
“The major determinant of gold last week was actually geopolitical tensions, but over the weekend, we did not see any crisis triggering event so we’re going to have less chances for gold prices in the upward direction,” said Mark To, head of research at Hong Kong’s Wing Fung Financial Group.
The US dollar won a reprieve from risk aversion on Monday and pulled away from last week’s 2-1/2 year low after North Korea held a party over the weekend rather than launch another missile.
“I would go long on the dollar for one week or so, but not for too long because the major determinants, the geopolitical tensions, are still with us and the slowing of interest rate hikes and other tightening measures are going to be with us as well,” To said.
North Korea warned on Monday the US would pay a “due price” for spearheading a UN Security Council resolution against its latest nuclear test.
Federal Reserve policymakers are expected to discuss balance sheet shrinkage at their next meet from 19-20 September in Washington and are widely expected keep interest rates unchanged. It is too soon to predict when the Fed should next raise rates as it continues to tighten policy, given “cross currents” in the economy and markets, New York Fed President William Dudley said on Friday.
Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.
Spot gold may break a support at $1,332 per ounce and fall more to the next support at $1,317, said Reuters technical analyst Wang Tao. Speculators raised their net long position in COMEX gold for the eighth straight week to the highest in nearly a year in the week to 5 September.
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.3% to 834.50 tonnes on Friday.
In other precious metals, silver slipped 0.5% to $17.83 an ounce after touching its highest since April in the previous session. Platinum lost 0.4% to $1000.70 an ounce, while palladium was 1% higher at $944 an ounce.