August 1, 2018 / 4:40 AM / 5 months ago

PRECIOUS-Gold edges lower on dollar strength ahead of Fed statement

    * U.S. dollar up on news Trump may propose higher tariff on
Chinese imports
    * Fears of escalation in trade war hits Asian stocks, yuan
    * Spot gold looks neutral in $1,214-$1,226/oz range -
technicals

 (Adds comments, updates prices)
    By Apeksha Nair
    BENGALURU, Aug 1 (Reuters) - Gold prices dropped on
Wednesday, pressured by a stronger U.S. dollar ahead of the
outcome of a Federal Reserve monetary policy meeting later in
the day. 
    "The dollar is up ahead of the Federal Open Market Committee
(FOMC) statement, and this provides us with an indication of
which way the FOMC is going to move," said Naeem Aslam, chief
market analyst, ThinkMarkets.
     The U.S. dollar, in which the yellow metal is priced, rose
against the yuan and growth-leveraged currencies on Wednesday
after a source familiar with the Trump administration's plans
said the White House was about to propose higher tariffs on $200
billion in Chinese imports.                     
    The news raised concerns of escalation in the tariff war
between the United States and China and sent Asian shares lower
with weak data in the region.                         
    Spot gold        was down 0.2 pct at $1,220.77 an ounce, as
of 0713 GMT. The bullion gained slightly in the previous session
on a weaker dollar versus the yuan after a report that the
United States and China were trying to restart negotiations to
defuse a potential trade war.
    U.S. gold futures         were 0.3 percent lower at
$1,220.10 an ounce.   
    "The trade tensions are also fuelling safe-haven flows into
the dollar. The greenback still appears to be the preferred safe
haven rather than gold," OCBC analyst Barnabas Gan said.
    Meanwhile, investors also focused on the outcome of a
two-day U.S. Federal Reserve monetary policy meeting for outlook
on interest rates. 
    The Fed is expected to keep rates unchanged, but solid
economic growth combined with rising inflation are likely to
keep it on track for another two hikes this year even as U.S.
President Donald Trump has ramped up criticism of its push to
raise rates.             
    With the Fed expected to stay the course with two interest
rate rises, which should underpin near-term dollar sentiment,
speculators will continue to fade upticks in gold in the absence
of safe haven and sluggish physical demand, said Stephen Innes,
APAC trading head at OANDA.
    Higher U.S. interest rates tend to boost the dollar and
pressure gold.
    Spot gold looks neutral in a range of $1,214-$1,226 per
ounce, Reuters technicals analyst Wang Tao said.                
  
    In other precious metals, silver        declined 0.8 percent
to $15.40 an ounce. Platinum        lost 0.8 percent to $828.20
an ounce and palladium        slipped 0.3 percent to $927.22.

 (Reporting by Apeksha Nair in Bengaluru; Editing by Subhranshu
Sahu and Sherry Jacob-Phillips)
  
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