Gold nudges down as strong US data boosts rate rise view

Gold prices inched down on Thursday as robust U.S. data potentially bolstered the chances of multiple U.S. interest rate hikes over the next year, but a weaker dollar curbed losses

The marginal decline came even as Wall Street suffered its worst drubbing in eight months.

Spot gold was down 0.2 percent at $1,192.58 an ounce at 0430 GMT. U.S. gold futures edged up 0.2 percent to $1,195.90 an ounce.

“Rising interest rates is not good news for gold. People are preferring U.S. Treasury bonds as they are more attractive in the current environment over gold, despite the sell-off in equities,” said Ronald Leung, chief dealer, Lee Cheong Gold Dealers, Hong Kong.

Data on U.S. producer prices, which rose in September after declining the previous month, and a revision to wholesale inventory estimates for August, added to a hawkish outlook on interest rates.

“The Fed is expected to raise interest rates in December but we are not sure about the future hikes as we have to see how the trade war will affect the U.S. economy. The upcoming mid-term elections in U.S. will also be very crucial,” Leung said.

The Fed can likely stop raising U.S. interest rates once they reach about 3 percent, as long as inflation remains around 2 percent and the economy is doing well, Chicago Federal Reserve President Charles Evans suggested on Wednesday.

Asian share markets, meanwhile, sank on Thursday following steep falls on Wall Street. U.S. President Donald Trump said Wednesday’s stock market sell-off was a long-awaited “correction,” and the Federal Reserve, which has been raising U.S. interest rates, had gone “crazy”.

“The sentiment that we have seen this morning with the Wall Street and Asian markets tanking is a chance for gold prices to reintroduce as a safe haven again, especially at this time of poor risk appetite,” OCBC analyst Barnabas Gan said.

“That is something investors will be looking at very closely if the dollar falls further.”

The dollar index, which measures the greenback against a basket of six major currencies, was down 0.3 percent.

Spot gold may break a resistance at $1,195 per ounce and edge up to the next resistance at $1,200, as it has temporarily bottomed around a support at $1,182, according to Reuters technical analyst Wang Tao.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 1.21 percent to 738.99 tonnes on Wednesday, for its first gains since July.

Meanwhile, spot silver was flat at $14.26 an ounce and palladium was little changed at $1,067.24. Platinum slipped 0.9 percent to $811.49 an ounce.

Source: CNBC