Gold gains as US dollar wilts on Sino-US trade deal hopes

[BENGALURU] Gold prices edged higher on Monday, after falling below the critical US$1,300 level to their lowest since Jan 25 in the previous session, as the US dollar softened on prospects of a trade deal between China and the United States.

Spot gold was up 0.3 per cent at US$1,296.61 per ounce as of 0352 GMT, after touching its lowest in more than a month at 1,289.91 in the previous session.

US gold futures were down 0.2 per cent at US$1,297.20 per ounce.

The US-China trade deal appears to be closer to reality, rolling back US tariffs on Chinese goods, as Beijing makes pledges on structural economic changes and eliminates retaliatory tariffs, a source briefed on negotiations said on Sunday.

"Dollar rose quite considerably last week and brought gold prices down, but we are seeing a reversal of that now (on trade deal prospects)," said Kyle Rodda, a market analyst with IG Markets in Melbourne.

"The global economy is still slowing and central banks should intervene to support their economy, which gives upside potential for gold in the medium-term," Mr Rodda said, adding that a resolution of the trade war will support an improvement in the growth outlook.

The US dollar was down about 0.1 per cent against major currencies.

The US dollar got further pressure from US President Donald Trump's comments that the Federal Reserve's tight monetary policy was contributing to a strong US dollar and hurting the United States' competitiveness.

Gold may break a support at US$1,289 per ounce and fall towards the next support at US$1,271, as suggested by a retracement analysis, according to Reuters analyst Wang Tao.

Gold is likely to be range bound, in the next three months, as "good economic data from US gives reason to expect the Fed to hike rates at some stage this year," said Dominic Schnider, head of commodities and Apac forex at UBS Wealth Management in Hong Kong.

People were becoming more risk seeking which was also negative for gold, he said.

Gold prices broke the critical US$1,300 support level on Friday as global stock markets rose.

As prices dipped, holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 1.5 per cent on Friday, their biggest one-day percentage fall since December 2016.

SPDR holdings have now given up all the gains it saw in January and are now down over 1.5 per cent this year.

Among the other precious metals, palladium gained 0.8 per cent to US$1,557 per ounce.

Spot silver gained 0.1 per cent to US$15.22, while platinum was 0.1 per cent higher at US$857.65 an ounce.

REUTERS