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Gold prices edged up on Wednesday, drifting near a four-month high hit last week, as the US dollar sank to a fresh three-year low, while worries about potential trade wars led to some risk-aversion trade as well. Spot gold was up 0.1 per cent at $1,342.30 per ounce at 0715 GMT, while US gold futures for February delivery rose 0.4 per cent to $1,342.30 per ounce.
“Gold could move higher as we are still in the early stages of a broader USD sell-off, with all eyes focused on 110 USD-JPY,” said Stephen Innes, APAC head of trading at OANDA.
The dollar touched a four-month low against the yen on simmering concerns that the US currency's yield advantage will start to erode as major central banks head towards unwinding their massive stimulus. Against the yen, the dollar fell below the 110 threshold for the first time in four months.
The dollar index fell to its lowest since December 31, 2014, on a fresh burst of speculative selling. A weaker dollar makes bullion more attractive for holders of other currencies.
“Global investors are also concerned about potential trade wars... which is stirring up some risk-aversion trade, so that, in turn, is supporting gold,” said Richard Xu, a fund manager at China's biggest gold exchange-traded fund, HuaAn Gold.
On Tuesday, US President Donald Trump had imposed import tariffs on washing machines and solar panels, putting a cloud over global trade at a time when its revival has fuelled hopes for a stronger world economy.
“I think gold prices will continue to trend higher along with other commodities, so $1,400 (an ounce) is our near-term target,” Xu said.
Fed rate hike
Markets also expect an US interest rate hike in March. Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion while boosting the greenback. Meanwhile, recent strong gains in equities weighed on the precious metal.
Most Asian stock indexes are up anywhere from 5 to 10 per cent since the start of the year with many at all-time highs. Spot gold is biased to break a resistance at $1,341 per ounce and rise towards the September 8, 2017 high of $1,357.54, according to Reuters technical analyst Wang Tao.
In other precious metals, silver was nearly flat at $17.05 per ounce after touching a 3-1/2-week low of $16.73 in the previous session. Platinum fell 0.2 per cent to $1,004.25 per ounce, while palladium 0.1 per cent to $1,093.15 per ounce.
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