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Gold inched down on Tuesday from a two-week high hit in the previous session, as the dollar firmed against yuan, making the precious metal expensive for buyers in the world's biggest consumer China.
China's central bank raised its daily guidance rate for the yuan by the most in nearly 15 months on Tuesday, sparking a demand for dollar. Spot gold fell 0.2 per cent to $1,209.04 an ounce at 0358 GMT, after hitting its highest since August 13 at $1,212.38 on Monday. US gold futures were down 0.1 per cent at $1,215.40 an ounce.
“The downtrend on the dollar has reversed, with markets probably concerned over the (currency) fixing in China. The market is still a little bit nervous overall when it comes to buying into the weaker US dollar narrative,” said Stephen Innes, Asia-Pacific trading head at OANDA in Singapore.
Dollar index
The dollar index inched up 0.1 per cent against a basket of six major currencies on Tuesday, after falling to a more than three-week low.
Gold has lost its appeal as a safe-haven asset, having fallen over 7 per cent so far this year, amid international trade disputes and the Turkish currency crisis, with investors increasingly turning to the US dollar instead.
The yellow metal, however, has recovered after touching 1-1/2-year lows on August 16 at $1,159.60 as the dollar's run slowed after President Donald Trump criticised the US Federal Reserve for raising interest rates at a time when the government was trying to stimulate the economy.
“We need a complete flip around momentum in the U.S. dollar for gold to push above $1,230 and move to $1,260. Unless the Fed takes the December rate hike off the table, gold does not have a chance to get near any of those supportive levels,” Innes said.
Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced. Spot gold may rise to $1,224 an ounce, as it has broken a resistance at $1,209 per ounce, according to Reuters technical analyst Wang Tao.
Spot silver was down 0.3 per cent at $14.81, after hitting its highest since August 15 at $14.92 on Monday. Platinum was up 0.4 per cent at $802.74, after touching a two-week high at $807.60. Palladium fell 0.1 per cent to $947.75. At $950.25, prices matched 1-1/2-month highs hit on Monday.
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