June 18, 2018 / 10:54 AM / a month ago

PRECIOUS-Gold steadies after worst fall since November 2016

    * Worries over U.S.-China trade dispute support gold
    * Investors eye German squabble over immigration
    * U.S. dollar holds near strongest since November
    * Global stock markets fall
    * Technicals suggest gold to fall further 

 (Updates prices)
    By Peter Hobson
    LONDON, June 18 (Reuters) - Gold on Monday held close to
5-1/2 month lows, with a strong dollar offsetting the impact on
prices of an escalating trade dispute between the United States
and China.  
    The stronger dollar dampens demand for gold by making it
costlier for buyers holding other currencies, while geopolitical
uncertainty fuels interest in bullion as a safe investment.
    Spot gold        was flat at $1,278.71 an ounce at 1434 GMT,
while U.S. gold futures         for August delivery were 0.2
percent higher at $1,281.20 an ounce.
    The dollar was slightly firmer and near its strongest since
November against a basket of currencies.              
    Gold plunged 1.8 percent on Friday, its biggest one-day fall
since November 2016, as Washington decided to enact tariffs on
$50 billion in Chinese goods, Beijing pledged to respond in kind
and the dollar rocketed higher.              
    Markets fear a trade war could damage global growth. World
stocks fell on Friday and Monday.            
    "We had a flush-out on Friday and the market is trying to
work out whether these new (gold) prices are justified or not,"
said Saxo Bank analyst Ole Hansen.
    Gold would remain sensitive to trade dispute headlines and
the possibility that a showdown over immigration between German
Chancellor Angela Merkel and her conservative allies the
Christian Social Union could escalate, Hansen said. 
                         
    "The market is also ignoring the political risks in
Germany," said analysts at Commerzbank. "A lack of consensus on
refugee policy could even cause a split in the government."
    On the technical side, Fibonacci support for gold was at
$1,267.10, with resistance at $1,301.40, analysts at
ScotiaMocatta said. 
    They added that as long as gold continued to trade below its
200-day moving average at $1,307 prices were more likely to fall
than rise.
    Reuters technical analyst Wang Tao said gold could break
support at $1,277 an ounce and fall towards $1,258-$1,268.
            
    Bets by funds on higher gold prices on the Comex exchange
had risen in the week to June 12, supporting prices, but
Friday's rout may have forced some to liquidate their positions.
             
    Holdings of gold by exchange traded funds (ETFs) tracked by
Reuters meanwhile were stable after falling by 1.4 million
ounces, or 2.4 percent, since late May.                
    In other precious metals, silver        was down 0.3 percent
at $16.46 an ounce after falling 3.6 percent on Friday. 
    Platinum        was 0.1 percent lower at $886.50 an ounce
and palladium        was down 0.5 percent at $991.25 an ounce. 

 (Additional reporting by Karen Rodrigues in Bengaluru
Editing by Louise Heavens and Adrian Croft)
  
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