London: Gold edged higher on Tuesday on doubts about global growth and geopolitical tensions, but was still within reach of a one-month low hit in the prior session as the dollar steadied on expectations of higher US interest rates.
Comments last week from US Federal Reserve Chief Janet Yellen suggesting the possibility of raising interest rates as early as in the first months of 2015 hurt bullion’s appeal as an alternative investment.
Low interest rates, which cut the opportunity cost of holding non-yielding bullion above other assets, had been a key factor driving bullion higher in recent years.
“Investors are moving on to the macroeconomic factors although there is still a lot of talk of sanctions against Russia,” Mitsubishi analyst Jonathan Butler said.
“The outlook for gold looks bearish given what we just heard from the Fed, the possible rise in interest rates soon after the QE tapering is done.” Spot gold rose 0.4 per cent to $1,313.99 by 1059 GMT, just above Monday’s low of $1,307.54, its weakest since February 20.
US gold futures stood at $1,315.40 an ounce, up $4.20.
The metal hit a six-month high of $1,391.76 last week as mounting geopolitical tensions and fears over slowing economic growth spurred demand for the metal as an insurance against risk.
“With the price unable to break through $1,400 recently, selling has returned to the market and it remains back on track for lower numbers,” Societe Generale head of research Asia Mark Keenan said.
The dollar steadied against a basket of major currencies, having slipped in the previous session after a disappointing reading on US manufacturing activity.
A batch of US economic data, including readings on consumer confidence and new home sales, as well as speeches from Atlanta Fed President Dennis Lockhart and Philadelphia Fed President Charles Plosser later on Tuesday should give more clues on the strength of the economy.
Investors were also eyeing the Ukraine crisis for trading cues. US President Barack Obama and major industrialised allies warned Russia that it faced damaging economic sanctions if it took further action to destabilise Ukraine following the seizure of Crimea.
As a gauge of investor interest, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose to their highest since December at 821.47 tonnes on Monday.
Physical buying subdued
Physical dealers said demand from jewellers and retail investors was subdued, keeping premiums for gold bars little changed in Singapore at $1 an ounce to the spot London prices.
“To be very honest, physical demand hasn’t picked up. I don’t know what customers are waiting for. Prices are a lot cheaper than last week, but the demand is not there,” said a dealer in Singapore.
Dealers in Hong Kong complained that a weak yuan and discounted prices on the Shanghai Gold Exchange had curbed buying interest from China, the world’s top consumer.
Among other precious metals, silver rose 1.2 per cent to $20.16 an ounce and platinum gained 0.5 per cent to $1,430.99 an ounce. Palladium slipped 1.1 per cent to $782.60 an ounce, having touched its highest since August 2011 at $799.50 in the previous session, boosted by a strike in South Africa, simmering tensions over Ukraine and the launch of two palladium-backed exchange-traded funds in Johannesburg.
Platinum producers Anglo American Platinum, Impala Platinum and Lonmin said on Tuesday a strike now in its ninth week at their South African mines was causing irreparable damage to the sector and local economy.
