International Business: Gold prices dip on dollar recovery, Brexit relief

Cornelia Mascio
Marzo 15, 2019

Spot gold rose 0.3 percent to $1,297.51 per ounce as of 11:34 a.m. EDT (1534 GMT), while United States gold futures were up 0.5 percent at $1,297.70.

Gold edged lower on Tuesday as appetite for risk improved after the European Commission agreed additional assurances in an updated Brexit deal, while stronger than expected U.S. data eased some fears about an economic slowdown. "This, coupled with the Brexit news, is helping gold", said Bob Haberkorn, senior market strategist at RJO Futures.

On the flip side, gold prices have gained about 13 percent since touching over 1-1/2 year lows in August last year, with recent gains driven by the U.S. Federal Reserve's patient stance on monetary policy and escalating worries over a global economic slowdown. "Traders are buying into the fact that they are expecting a very dovish US Fed announcement", Haberkorn said. Gold breached the psychologically significant $1,300 level on Tuesday, helped by a weaker dollar, with demand for the US currency taking a hit after softer-than-expected US February inflation data and falling government bond yields. However, European shares regained some ground on Wednesday, buoyed by optimism that British lawmakers were set to rule out a no-deal Brexit.

Investors would now be keeping a close eye on a vote on the Brexit deal around 3:00 p.m. ET (1900 GMT), with Prime Minister Theresa May's newly won assurances on her divorce deal failing to win over the main Brexit faction in her Conservative Party.

The result plunged the country into fresh instability just 17 days before the planned exit day of March 29.

Reflecting investor sentiment, holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.4 percent to 769.53 tonnes on Monday. "This should support gold prices", analysts at ABN Amro said in a note.

"It is a combination of factors that have weighed on gold; weak Chinese data that is weighing on industrial demand for the metal, risk-on sentiment, rebounding yields, a higher dollar and stronger United Kingdom stocks", said Forex.com analyst Fawad Razaqzada.

Among other precious metals, palladium was down 0.8 percent at 1,543.46 per ounce, while platinum dipped 0.9 percent to $829.24 per ounce.

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