Gold falls as US tariff fears, rate hike views buoy US dollar

[BENGALURU] Gold prices fell on Thursday, after hitting their highest in over a week in the previous session, as fears of another round of US tariffs on China and expectations of higher interest rates lifted the US dollar.

Spot gold was down 0.4 per cent at US$1,191.18 an ounce at 0244 GMT. Prices failed to hold the psychological level of US$1,200, after hitting US$1,201.51, their highest since Aug 13, in the previous session.

US gold futures were down 0.3 per cent at US$1,200 an ounce.

"People are worried about the fresh round of US tariffs on China and are buying the dollar, which is seen as a safe haven now," said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.

US and Chinese officials met for the first time in over two months to find a way out of their deepening trade conflict, but there was no evidence the low-level discussions would halt a new round of US tariffs due to go into effect on Thursday.

"The fear of rate hikes is also pressuring gold. Despite Donald Trump's recent attack on rising interest rates, we think the Fed may have its way," Fung said, adding the US$1,200 level is acting as a strong resistance for the precious metal.

Minutes of the Federal Reserve's latest policy meeting suggested the US central bank is on course to further raise interest rates.

The Fed has raised rates twice this year and is widely expected to tighten policy again next month after leaving rates unchanged at their last meeting.

Rising interest rates increase the opportunity cost of holding non-yielding gold while boosting the US dollar, in which it is priced, making the yellow metal more expensive for buyers using other currencies.

The dollar index, which measures the greenback against a basket of six major currencies, was up 0.3 per cent at 95.411, after falling to its lowest in nearly three weeks at 94.934 on Wednesday.

Markets are now eagerly watching for the Fed's economic symposium in Jackson Hole, Wyoming, which will begin on Friday. Investors will wait to hear any change in stance from the central bank especially after President Donald Trump's attack on its monetary policy early this week.

Spot silver was down 0.6 per cent to US$14.64 an ounce.

Platinum fell 0.4 per cent to US$788.80 an ounce, while palladium fell 1 per cent to US$916.90 an ounce, after hitting a three-week high at US$928.50 an ounce on Wednesday.

REUTERS