Gold prices dipped slightly on Tuesday, hovering not far off a 2018 low struck in the previous session as a firm dollar near five-month highs and optimism in global markets curbed appetite for the precious metal.
Spot gold eased 0.1 percent to $1,290.66 per ounce as of 0250 GMT. In the previous session, it slid to $1,281.76, its lowest since December 27. U.S. gold futures for June delivery were 0.1 percent lower at $1,290.10 per ounce.
“I think the overriding narrative here is where the dollar is going,” said Stephen Innes, APAC trading head at OANDA.
Abating geopolitical risk was also weighing on sentiment for gold, he added.
The dollar traded below a five-month high against a basket of currencies on Tuesday, catching its breath after a broad rally inspired by rising U.S. bond yields and relief at an easing of U.S.-China trade tensions.
Washington and Beijing both claimed victory on Monday as the world’s two largest economies stepped back from the brink of a global trade war and agreed to hold further talks to boost U.S. exports to China.
Meanwhile, Asian shares extended gains on Tuesday on renewed optimism about global growth after the U.S./China agreement.
Expectations that the Federal Reserve will lift U.S. interest rates again next month added to downward pressure on gold. Higher U.S. rates tend to boost the dollar and push bond yields up, make non-yielding assets like bullion less attractive.
U.S. Treasuries were steady on Monday, after benchmark yields rose to a 7-year peak last week, as investors awaited release of the latest Federal Reserve minutes on Wednesday.
Rising inflation means the Fed should hike interest rates two or possibly three more times this year, and could move as soon as next month, Philadelphia Fed President Patrick Harker said on Monday.
“Somewhere around the $1,275 level we are going to start to attract more bullish sentiment but in the mean time the driver is going to remain the U.S. dollar,” Innes said.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.38 percent to 852.04 tonnes on Monday.
Among other precious metals, silver and palladium were both little changed at $16.47 an ounce and $989.70 an ounce, respectively.
Platinum rose 0.1 percent at $897 an ounce, after marking a fresh low for the year in the previous session at $873.50.