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Wednesday, January 19, 2022

Gold lower as dollar steadies in higher US rates environment

Gold lower as dollar steadies in higher US rates environmentNEW YORK/LONDON: Gold prices dropped, remaining near a six-month low on Wednesday as the US dollar hovered around 11 month peaks but was offset by festering global trade tensions, while platinum hit a 2-1/2-year trough.

Rising US interest rates also pressured bullion.

Spot gold lost 0.2 percent at $1,272.44 by 1:36 p.m. EDT (1736 GMT). US gold futures for August delivery settled down $4.10, or 0.3 percent, at $1,274.50 per ounce.

Trade tensions between the United States and China are showing no signs of easing. On Tuesday, a White House trade adviser said Beijing had underestimated the US president’s resolve to impose more tariffs.

That followed Washington threatening to impose tariffs on $200 billion of Chinese goods and Beijing saying it was raising tariffs on $50 billion of US goods.

Gold, seen as a safe haven asset, usually gains from geopolitical or economic tensions, but has struggled this time around because the dollar has risen strongly, making dollar-priced gold costlier for non-US investors.

“This environment we’ve had with interest higher rates and a higher US dollar has kind of halted the rise of gold at least for the short term,” said Will Rhind, CEO of GraniteShares.

Higher US interest rates make gold a less attractive investment since it does not bear interest.

However, “the reason it hasn’t fallen as much as you’d expect is that safe-haven demand has sustained the price,” said Capital Economics analyst Simona Gambarini.

The US dollar was little changed, hovering near an 11-month peak against a basket of major currencies as China’s signal of a tolerance of a stronger yuan offset anxiety about the global trade conflict.

World markets recovered from a recent selloff on the trade tensions, while Treasury yields rose after the Federal Reserve chairman said the US central bank should continue with a gradual pace of interest rate increases.

Copyright Reuters, 2018

Source: Brecorder

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