Gold given respite by planned US, China trade talks

[LONDON] Gold prices bounced from 19-month lows on Thursday as the dollar slipped on news that China and the United States will hold trade talks this month, although sentiment remained negative.

Spot gold was up 0.6 per cent at US$1,181.06 an ounce at 1149 GMT from an earlier low of US$1,159.96, its weakest since January last year. US gold futures climbed 0.2 per cent to US$1,187.9.

Gold prices have tumbled more than 10 per cent since their April peak above US$1,365 an ounce.

The meeting between a Chinese delegation and US representatives offers hope for progress in resolving the trade conflict that has unnerved financial and commodity markets in recent weeks.

Political and economic uncertainty have seen investors opt for the safety of US Treasuries and the US currency, which when it rises makes dollar-denominated gold more expensive for holders of other currencies, potentially subduing demand.

"I'm viewing the news of the talks as arresting the slide, not reversing it. The talks are low level, we are not out of the woods yet, sentiment is still bearish," said Ole Hanson, head of commodity strategy at Saxo Bank.

"For a significant gold recovery we need to see the dollar lose some of the strength that has built up. The risk to emerging market growth from currency pressures is not going away immediately."

The US dollar has gained about 8 per cent against a basket of other major currencies since the middle of February.

Part of the reason behind its ascendancy has been higher interest rates in the United States and the prospect of more to come this year and next.

Higher interest rates raise the cost of holding gold, which earns nothing and needs money to store and insure.

"The underlying narratives of a strong dollar and relatively high US interest rates still seem to be the predominant headwinds for gold," said INTL FCStone analyst Edward Meir.

Silver, platinum and palladium, which have industrial applications, also rallied.

Silver gained 1.2 per cent to US$14.60 an ounce after earlier hitting the lowest since February 2016 at US$14.30.

Palladium added 4.8 per cent to US$882.97 an ounce, having hit a more than 13-month low at US$832 earlier.

Platinum climbed 2.7 per cent higher to US$783.90, after earlier sinking to its lowest since October 2008 at US$751.25.

Platinum, under pressure for some years, is oversupplied. It is heavily used in autocatalysts for diesel cars, which have fallen out of favour since 2015's Volkswagen emissions-rigging scandal.

The world's top producer of platinum is South Africa, which saw its rand currency hit a two-year low due to contagion from the Turkish lira earlier this week.

A lower rand cuts costs for South African miners when expressed in US dollars, which means they can keep producing and delaying the process of rebalancing the market.

REUTERS