Gold prices edged up on Friday after falling nearly 1 per cent in the previous session, but expectations of higher US interest rates and a robust dollar amid the Sino-US trade war kept a lid on the market.
Gold has lost its appeal as a safe-haven asset amid international trade disputes and the Turkish currency crisis, with investors increasingly turning to the US dollar instead.
Spot gold was up 0.2 per cent at $1,187.06 an ounce at 0337 GMT, after falling about $10 on Thursday. Prices have risen 0.2 per cent so far this week, after dropping for six straight weeks. US gold futures were down 0.1 per cent at $1,192.60 an ounce.
Trade war escalates
US and Chinese officials had ended two days of talks on Thursday with no major breakthrough as their trade war escalated with activation of another round of tariffs on $16 billion worth of each country's goods.
“Investors are worried about the trade war and that has helped the dollar. But the dollar will not be as strong as it has been going forward and that should help gold prices to go up,” said Ji Ming, chief analyst at Shandong Gold Group.
The dollar eased 0.1 per cent to 95.587 against a basket of six major currencies on Friday, after rising 0.6 percent the day before.
Powell’s speech at Jackson Hole
Investor focus is shifting to a speech by Federal Reserve Chairman Jerome Powell later on Friday at an annual meeting of central bankers in Jackson Hole, Wyoming.
Fed policymakers broadly agree that US interest rates should rise further this year and next, despite U..President Donald Trump's displeasure with such a plan, two policymakers' comments underscored on Thursday.
“Fed officials have been repeatedly saying that rates will be raised in the future and there was no surprise in that. What their reaffirmation tells the market is that the central bank will not be influenced by President Donald Trump,” Ming said.
Gold has fallen about 9 per cent so far this year on a firm dollar and rising interest rates. Prices touched 1-1/2-year lows last week, before recovering a touch.
“There is some buying as gold has been in a downward trough for a while. $1,200 remains an interesting level and we might see prices going down again if that level does not hold,” said Brian Lan, managing director at dealer GoldSilver Central in Singapore.
Negative sentiment towards gold was reflected in record net short positions and liquidations in exchange traded funds (ETF). Holdings of SPDR Gold Trust, the world's largest gold-backed ETF, have fallen over 3 million ounces from a peak in late April.
Spot silver was up 0.2 per cent at $14.49 an ounce, after touching a one-week lows of $14.41 on Thursday. Platinum was up 0.6 per cent at $779.80 an ounce, after earlier hitting its lowest in a week at $769.50. Palladium was steady at $915.50 an ounce.