Gold Prices Drop to a Two-Week Low, as Dollar Rebounds Over Trade Caution

Gold prices on Thursday dropped to a two-week low, as the dollar recovered losses after cautious comments from the US Trade Representative Robert Lighthizer which dented investors’ hope for ending the tariff war with China.

As of 0340 GMT, sport gold and the US gold future slipped by 0.1% to $131850 and $1320.10 per ounce respectively. The metal considered to be safe heaven, has dipped to its lowest point since February 15 at $1316.43 in the previous session slipping for the first time in five months.

MCX Gold was trading at 0.11% down at Rs 33248 per 10gm at around 10:30 AM IST. On the other hand, MCX Silver jumped by 0.12% at Rs 39809 per 1kg around the same time.

In an address to a Congressional hearing, Lighthizer told that it was too early to predict the outcome of ongoing trade talks with China, and the United States would need to maintain the threat of tariffs on Chinese goods for years to come even if the two parties strike a deal.

An economist at the National Australian Bank, Jon Sharma said that there is some amount of uncertainty about the trade deal which has led some of the demand for gold to go to the US dollar. He said that this shift of demand has taken a bit of bid from gold. Sharma further added that gold is expected to come up with some corrections and that prices will move around the $1310-$1330 bracket depending on the dollar. He claimed that main support for gold comes from Federal Reserve’s dovish stance and that a lot if central banks are keen on accumulating gold.

Federal reserve chairman Jerome Powell said on Wednesday that the US Central Bank would stop shrinking its $4 trillion balance sheet later this year, ending a process that investors say works at cross-purposes with the Fed current pause on interest rate hikes. During his testimony to the Senate Banking Committee on Tuesday, Powell reaffirmed that the Federal Reserve would maintain patience in hiking interest rates.

Back in India GDP of the third quarter will be focused on, as a disappointing growth figure will keep the rupee under tension. This could restrict any major fall in gold prices on the domestic exchanges. Motilal Oswal Financial services stated that Gold on MCX is expected to quote in the range of Rs 33030 and Rs 33450 for the day.

Edward Moya, a senior market analyst at OANDA, said in a note that the precious metal’s recent consolidation is supported by hesitation the financial markets have in pricing in what will be the Fed’s next move. He noted that Gold may struggle climbing higher until the market sees further deterioration in US data, which would seal the market expectation for the next move to be a rate cut.

Spot silver slipped by 1% to $15.72 per ounce, on the other hand, platinum dipped by 0.4% at $861.80. Moreover, spot palladium dipped further down from its all-time peak of $1565.09 per ounce that it hit earlier this week and was down by 0.1% on Thursday at $1527.50.