Gold Falls From 2-Week High as USD Rebounds in Asian Market Hours

Gold inched down on Tuesday from a two-week high hit in the previous session, as the dollar firmed in broad market 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 earlier today, sparking a demand for dollars.

As of writing this article, spot gold XAUUSD is trading at $1211.84 up 0.04% on the day after hitting its highest since Aug. 13 at $1,212.38 on Monday, while US Gold futures GCcv1 were trading at $1217.30 an ounce up 0.10% on the day. 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 U.S. dollar narrative.

The US dollar index DXY which measured the strength of US dollar in the broad market against six major currencies saw uptrend movement in Asian market hours on news that Trump & Merkel supported continued talks of EU-US trade relations.

Precious Metals Continue Uptrend Movement But Upside Limited As USD Rebounds in Broad Market

Gold has lost its appeal as a safe-haven asset, has fallen over 7 percent so far this year, amid international trade disputes and the Turkish currency crisis, with investors increasingly turning to the U.S. dollar instead. 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 support levels. Precious metals are 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 Silver XAGUSD is trading at $14.96 up 0.40% on the day.

Crude oil futures were higher during mid-morning trade in Asia Tuesday amid expectations that weekly US inventory data will show a decline and sanctions on Iran will impact supply. Analysts surveyed on Monday by S&P Global Platts were expecting US crude stocks to have declined by 3 million barrels for the week ended August 24.

Although some analysts polled expected a slight build, the general expectation was for a draw. Analysts attributed the upside in oil prices to speculative positions created by traders as prices picked up in the global oil market as risks of supply disruptions from places such as Venezuela, Africa, and Iran triggered expectations of a tightening market. As of writing, spot crude WTIUSD is trading at $69.64 up 0.04% on the day.