Gold prices inch 0.2% higher on floppy dollar effect

U.S. Dollar Index

U.S. Dollar Index

24k gold is priced at Dh156.75 in Dubai and 22k can be bought at Dh147.25.

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Spot gold rose 0.3% to $1,293.89 an ounce at 3.30am GMT, after shedding 1.7% and marking the lowest this year at $1,288.31 in the previous session.

Gold futures on the COMEX division of the New York Mercantile Exchange dropped Tuesday to lowest settlement of year, as USA dollar rallies, Treasury bonds yield jumps.

This was also the lowest price level for the yellow metal since December 28.

Among the S&P industry groups, the rate-sensitive real estate space ended at the bottom of the standings with a 1.7% loss, including a 3.8% rout in the iShares U.S. Home Construction ETF.

Higher U.S. interest rates tend to boost the dollar and bond yields, making greenback-denominated gold more expensive for holders of other currencies and denting the appeal of non-yielding assets such as bullion.

A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies, while rising USA yields tend to weigh on bullion's non-yielding appeal.

Comex Gold
Daily June Comex Gold

The dollar eased 0.1 percent to 92.456 versus a basket of six major currencies, retreating further from its 2018 peak hit last week on the back of sagging USA yields, after softer economic data curbed prospects of aggressive rate hikes in the United States.

Meanwhile, Asian shares were under pressure after North Korea cancelled high-level talks with Seoul, denouncing military exercises between South Korea and the US and throwing into question next month's unprecedented summit between Kim Jong-un and US President Donald Trump.

While gold prices are likely to be drawing some support from a rift between the US and Iran, investors said easing US-China trade concerns could add downside risks to prices.

Higher interest rates in the United States amid a rising dollar will continue to add downward pressure on gold, Lau said.

Technical and momentum indicators suggested that gold could fall to about $1,278, ScotiaMocatta analysts said.

Palladium was 0.1 percent lower at $994.70, after hitting a two-and-a-half-week high at $1,008.50 on Friday.

The rising tensions in Gaza had induced some safe-haven buying for gold earlier in the session, ANZ analysts said in a note.

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