London: Gold slid below key support at $1,200 an ounce for the first time in a month on Tuesday as concerns over Italy’s budget and ongoing Brexit talks, along with expectations for further US rate hikes, held the dollar near 16-month highs.
Dollar strength has outweighed any positive impact of risk aversion on gold, traditionally also seen as a safe store of value in times of market volatility.
Stock markets recovered some lost ground after the previous day’s tech-led losses, meanwhile, potentially diverting interest from alternative assets like bullion.
Spot gold was down 0.2 per cent at $1,197.77 per ounce at 1049 GMT, having fallen to its lowest since October 11 at $1,195.90 earlier in the day. US gold futures fell 0.5 per cent at $1,198.00 per ounce.
“The US dollar has tightened its grip on gold again,” said Julius Baer analyst Carsten Menke. “The dollar’s strength since the middle of last week has been the main factor pushing gold lower.” The $1,200 level is important psychologically and from a technical point of view, he added. “It will be quite crucial for gold to keep this level in order to not see bigger downside risks,” he said.
The metal posted its biggest weekly drop since August last week after the US Federal Reserve reaffirmed its commitment to tightening monetary policy, a move likely to weigh on interest in non-yielding bullion.
“It’s likely that gold will suffer for another couple of weeks, until the Fed’s meeting in mid-December, while the bearish pressure is unlikely to last into the first part of the new year, traditionally bullish for the precious metal,” ActivTrades chief analyst Carlo Alberto De Casa said in a note.
More positively for gold, holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.90 per cent to 762.00 tonnes on Monday. Its holdings hit their lowest since early 2016 last month after declining over the summer.
On the wider financial markets, European shares edged up on Tuesday, shrugging off losses on Asian markets overnight and a rout among Wall Street tech stocks on Monday.
Among other precious metals, silver was up 0.3 per cent at $14.00 per ounce, having touched a more than two-month low of $13.92 earlier in the session.
Palladium climbed 0.7 per cent to $1,103.50 per ounce, while platinum rose 0.3 per cent to $843.60 an ounce.