Gold prices buoyed by weaker US dollar, Asian stocks

Bengaluru

GOLD prices recovered from a seven-month low on Monday, as the US dollar traded below its recent highs and after sluggish gross domestic product (GDP) data from China weighed on Asian stocks.

Spot gold was up 0.2 per cent at US$1,242.86 an ounce at 0730 GMT, after marking the lowest since Dec 12 at US$1,236.58 on Friday.

US gold futures for August delivery were about 0.2 per cent higher at US$1,243 an ounce.

"The CNH (Chinese yuan traded offshore) is a bit stronger versus the dollar, and that's giving gold some support," a Hong Kong-based trader said.

The absence of increased rhetoric out of Beijing or Washington over the weekend likely gave the CNH a bit of reprieve, the trader said, adding that technically gold was under pressure and would still be sold on rallies toward US$1,250.

The US dollar seesawed versus the Chinese yuan even as official data on Monday showed that China's GDP slowed in the second quarter as expected. Against a basket of six major currencies , the greenback traded below a 10-day peak.

A weaker US dollar makes greenback-denominated gold cheaper for holders of other currencies.

Asian shares were lower on Monday after data pointed to slowing growth in the world's second-largest economy, and as investors remained cautious over the impact of the heated Sino-US trade war.

Gold prices, which can gain in times of political uncertainty, have failed to benefit from the ongoing trade dispute.

"The dollar has been traditionally a safe haven asset, and could be re-positioned as such especially if risk events and uncertainties continue to brew into the backdrop," said OCBC analyst Barnabas Gan.

Meanwhile, investors are looking to June US retail sales data, due later in the day, to assess the state of the economy.

The Federal Reserve last Friday pointed to "solid" US economic growth during the first half of the year in its semi-annual report to Congress, where it also reiterated that it expected to continue to raise interest rates gradually.

Higher US rates tend to boost the greenback and push bond yields up, weighing on non-interest bearing gold.

Spot gold may break a support at US$1,237 per ounce and fall to the next support at US$1,226, Reuters technicals analyst Wang Tao said.

Hedge funds and money managers cut their net long position in Comex gold contracts to a two-and-a-half-year low in the week to July 10, US data showed last Friday.

In other precious metals, silver was up about 0.2 per cent at US$15.80 an ounce, after hitting a seven-month low at US$15.67 in the previous session. Platinum was down 0.3 per cent at US$823.50 an ounce, while palladium climbed 0.4 per cent to US$940.80. REUTERS