Gold prices slip as dollar recovers from 3-year low

Gold prices reversed early gains to trade slightly lower on Wednesday as the US dollar recovered from a three-year low against a basket of currencies.

Spot gold was down 0.3 per cent at $1,334.86 an ounce by 0641 GMT, after rising to $1,343.91 earlier in the session. It had touched its strongest since September 8 at $1,344.44 on Monday. US gold futures were down 0.1 per cent at $1,335.40 an ounce.

The dollar index was up 0.3 per cent at 90.684, after dropping to its lowest since December, 2014 to 90.113 early in the session. “Most of the move in gold has been dollar denominated ... We have seen very little change in ETF holdings. There is very little change in perception of gold in terms of safe haven demand,” said Mark Keenan, global commodities strategist and head of research - Asia-Pacific at Societe Generale.

“The outlook for gold in our view is down due to the lack of physical demand in Asia and the outlook for rate hikes this year is a headwind for gold.”

The US Federal Reserve is widely expected to raise interest rates multiple times this year, although at a gradual pace. Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

Asian stocks stepped back from a record high on Wednesday as the region's resource shares were hit by falling oil and commodity prices, while digital currencies tumbled on worries about tighter regulations.

“While the US dollar remains the most prominent driver of momentum, we cannot overlook the meltdown in Bitcoin on the back of regulatory oversight adding to the gold risk premium,” said Stephen Innes, APAC head of trading at OANDA.

Bitcoin extended its sharp tumble of the past 24 hours, skidding more than 7 per cent on Wednesday in a rapid downturn in fortunes as investors were spooked by fears regulators might clamp down on an asset whose value has skyrocketed in the past year.

Spot gold targets its September 8, 2017 high of $1,357.54 per ounce, as suggested by its wave pattern and a retracement analysis, according to Reuters technical analyst Wang Tao.

Among other precious metals, spot palladium was up 0.6 per cent at $1,100 per ounce. The metal, which hit a record high of $1,138 an ounce on Monday, fell nearly 3 per cent on Tuesday. Palladium has had a sustained rally as high demand in the auto industry fuelled supply concerns, sending Nymex palladium futures net long positions to record highs.

Spot silver fell 0.3 per cent to $17.15 per ounce. Spot platinum was mostly unchanged at $998, after touching its highest since September 8 at $1,006.60.

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