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Gold prices edge lower as US dollar gains over yuan

Bengaluru

GOLD prices shed early gains on Thursday, as the US dollar stood tall against the Chinese yuan amid a grim outlook for the world's second-largest economy.

Spot gold was down 0.3 per cent at US$1,227.61 an ounce, as at 0755 GMT. Earlier in the session, the yellow metal hit US$1,235.16, its highest in more than a week, underpinned by positive US-EU trade negotiation talks.

US gold futures for August delivery were 0.3 per cent lower at US$1,227.70 an ounce.

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Market voices on:

"The dollar is stronger against the CNH (Chinese yuan traded offshore) and therefore gold is weaker," a Hong Kong-based trader said.

The offshore Chinese yuan dropped 0.6 per cent to US$6.7910. A heated Sino-US trade dispute, signs of a slowdown in the economy and moves by Beijing to loosen monetary conditions have all conspired to dent the yuan's outlook.

"The US-China trade dispute, though, still remains unresolved and is the more challenging one. On gold, it is likely to ebb and flow with US dollar movements, before gaining momentum towards the end of the year," said John Sharma, economist, National Australia Bank.

Meanwhile, Asian shares inched up as the United States and Europe agreed to negotiations to ease barriers on trade, but weakness in China markets underscored persistent worries about the outlook for global growth.

Investors are also watching out for the European Central Bank's (ECB) policy meeting, which is due later in the day and the second-quarter US economic growth data, which is expected on Friday.

The ECB is all but certain to keep policy on hold on Thursday, arguing that the risks from an amplifying global trade conflict do not warrant a deviation from its plan to gently exit its easy-money policy of the last few years.

Holdings of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund fell 0.29 per cent to 800.20 tonnes on Wednesday.

However, Reuters technical analyst Wang Tao said, spot gold may break a resistance at US$1,237 per ounce and rise into a range of US$1,246 to US$1,258.

Among other precious metals, silver edged 0.4 per cent lower to US$15.50 an ounce, after earlier hitting its highest since July 17 at US$15.67 an ounce.

Palladium dropped 0.5 per cent to US$934.50 an ounce. It touched an over one-week high at US$941.10 in the previous session.

Platinum was down 0.5 per cent at US$836.10 an ounce. REUTERS