Gold prices dipped early this Monday morning due to a strong and active dollar based on the easing of fears of an escalation of the US-China trade war shortly after a report that the US currently does not have any plans of removing Chinese businesses from the US stock markets.
Gold prices at $1490.50 per ounce was 0.4% lower as of 0649 GMT. In the previous session, spot gold prices had hit $1486.60 which has been the lowest since Sept. 18, 2019.
U.S. gold futures at $1,497.20 per ounce dipped 0.6%.
Bloomberg reported this past Saturday,Treasury spokeswoman Monica Crowley as saying, that the Trump administration is not thinking of blocking any Chinese company from listing their shares on the US stock exchanges at this time.
This followed just the opposite report by Reuters on Friday that the administration had been planning to de-list Chinese companies from the US stock markets, increasing the worry among investors regarding the long drawn-out trade war between the two countries.
Because of this confusion over contradicting headlines, investors in the short term stop their position in equities and begin to switch to bond markets and this boosts the value of the dollar which in turn raises the value of gold, remarked AxiTrader market strategist, Stephen Innes.
On Sunday, Chinese Vice Commerce Minister Wang Shouwen, said prior to trade talks with the US that the economies of the the two major countries in the world would resolve their disagreements calmly and rationally.
Interest rates also influence the dipping of gold prices as higher interest rates boosts the dollar. Patrick Harker, the Philadelphia Federal Reserve Bank’s President said last Friday that he opposed the central bank’s rate cut in September and believes the US Federal Reserve (Fed) should ‘hold firm’ on interest rates.
When higher interest rates boost the dollar, gold prices in the US become more expensive for buyers who use other currencies and lowering investor interests in non-yielding bullion.
Howie Lee, who is an economist at OCBC Bank located in Singapore and which was awarded the World’s Best Bank (Asia-Pacific) in 2019 by the Global Finance Magazine, says that though the rally on gold prices may be capped by the Fed, the upward momentum appears to be intact in the near-term.
Reuters technical analyst Wang Tao says that gold prices may fall towards $1,462.