December 3, 2018 / 10:47 AM / 12 days ago

PRECIOUS-Gold at highest in nearly a month on U.S.-China trade detente

* Trump and Xi agree on 90-day trade truce to negotiate

* Palladium hovers below record highs hit on Friday

* GRAPHIC-2018 asset returns: tmsnrt.rs/2jvdmXl (Updates prices)

By Swati Verma

BENGALURU, Dec 3 (Reuters) - Gold climbed to its highest in nearly a month on Monday as the dollar weakened after the United States and China agreed a temporary truce in their trade war.

Spot gold rose 0.6 percent to $1,228.67 an ounce by 1153 GMT, having touched its highest level since Nov. 7 at $1,232.22.

U.S. gold futures gained 0.7 percent to $1,234.

“The appeal of U.S. dollar as a safe haven is softening and that leads to a rising gold price,” said Julius Baer analyst Carsten Menke.

“This is very much as expected under the assumption that there was some sort of a positive development at the G20 meeting in terms of the trade tensions between the U.S. and China.”

Washington and Beijing agreed at the G20 summit in Argentina to halt additional tariffs, halting escalation in their trade war as the two sides try to resolve their differences within 90 days.

This weighed on the dollar index, which measures the greenback against a basket of six major currencies, making gold cheaper for holders of other currencies.

“Bullion is likely to get a further boost if prices manage to stand firmly above $1,230 and particularly if they surpass $1,235,” ActivTrades’ chief analyst Carlo Alberto De Casa wrote in a note.

“In this case, there could be space for further rallies, with a first target at $1,260 and a more ambitious one at $1,300. A climb would become more likely if the U.S. Federal Reserve reduces the number of rate hikes in 2019/20.”

Lower interest rates reduce the opportunity cost of holding non-yielding bullion and weigh on the dollar.

The U.S. currency was the preferred safe haven this year as the U.S.-China trade conflict unfolded against a backdrop of higher U.S. interest rates, denting gold’s appeal.

In the week to Nov. 27 speculators increased their net short position in gold by 8,464 contracts to 51,828 contracts, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

“The key point is still the very bearish positioning in the futures market, which is partly due to the strong U.S. dollar and the outlook for further rising interest rates. Now that we have a relief in that regard this could provide some more upside for gold in the short term,” Julius Baer’s Menke said.

Among other precious metals, palladium gained 0.5 percent to $1,183.99 an ounce after crossing the $1,200 mark for the first time on Friday.

Spot silver climbed 1.5 percent to $14.38 and platinum rose 1.2 percent to $807.40. (Reporting by Swati Verma in Bengaluru Editing by Ed Osmond and David Goodman)

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