Gold slips to 1-year low as US dollar firms

“Gold market is just following the US dollar, the dollar is strong so it’s pushing the market down,” said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong. (Reuters)
Updated 19 July 2018
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Gold slips to 1-year low as US dollar firms

BENGALURU: Gold extended falls to a one-year low on Thursday as the US dollar firmed after Federal Reserve Chairman Jerome Powell asserted the need for further interest rate hikes amid a strong economy.
Spot gold was down 0.2 percent at $1,223.56 an ounce at 0703 GMT.
The yellow metal slipped to its lowest since July last year at $1,220.41 an ounce earlier in the session. US gold futures for August delivery were 0.4 percent lower at $1,223.20 an ounce.
“Gold market is just following the US dollar, the dollar is strong so it’s pushing the market down,” said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.
“The economy is still good and interest rate still up, so that’s good for the US dollar and negative for gold for the time being.” The dollar held firm against its peers, supported by bullish comments from Powell, which affirmed expectations for at least two more interest rate hikes this year.
“Rallies continue to be well sold and it is difficult to see a break toward $1,236 — $1,240 (in gold) with the current dollar strength,” MKS PAMP Group said in a note.
Fed’s Powell in a closely watched two-day congressional testimony, said he believed the United States was on course for years more of steady growth, and carefully played down the risks to the US economy of an escalating trade conflict.
However, manufacturers in every one of the Federal Reserve’s 12 districts worried about the impact of tariffs, a Federal Reserve report said on Wednesday, even as the US economy continued to expand at a moderate to modest pace.
US President Donald Trump said on Wednesday the United States may hammer out a trade deal with Mexico, and then do a separate one with Canada later, sowing fresh doubts about the future of the North American Free Trade Agreement.
Spot gold has found a support zone of $1,220-$1,226 per ounce.
It may hover above this zone for one more day or bounce toward a resistance at $1,237, Reuters technical analyst Wang Tao said.
Among other precious metals, silver was down 0.8 percent at $15.41 an ounce, after earlier hitting its lowest since last July at $15.33 an ounce.
Platinum was 0.4 percent lower at $810.30 an ounce. In the previous session, it hit an over two-week low of $798.14.
Palladium was down 0.1 percent at $905.47 per ounce. It fell to its weakest since April 9 at $902.97 on Wednesday.


World’s biggest sovereign fund worried about trade wars

Updated 21 August 2018
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World’s biggest sovereign fund worried about trade wars

  • The fund posted a positive return of 1.8 percent, or 167 billion kroner ($19.8 billion), in the second quarter
  • Markets are worried about a trade dispute between the United States and China

OSLO: The managers of Norway’s sovereign wealth fund, the world’s biggest, expressed concern Tuesday about global trade tensions, which could heavily impact its value.
The fund posted a positive return of 1.8 percent, or 167 billion kroner ($19.8 billion), in the second quarter, helping erase a loss of 171 billion kroner in January-March that was attributed to a volatile stock market.
The Government Pension Fund Global, which saw its total value swell to 8.33 trillion kroner by the end of June, manages the country’s oil revenues in order to finance Norway’s generous welfare state when its oil and gas wells run dry.
But Norway’s central bank, which runs the fund, said geopolitical and trade tensions presented a risk.
“It’s fair to say that increased trade barriers or even trade wars will not be beneficial for the fund as a long-term global investor,” Trond Grande, the deputy chief of Norges Bank Investment Management, told reporters.
Markets are worried about a trade dispute between the United States and China. Accusing Beijing of unfair competition, the US administration is considering slapping a new round of levies worth $200 billion on Chinese goods.
Talks between the two slated for Wednesday and Thursday aimed at resolving the dispute have however eased concerns somewhat.
Following US-Turkey tensions that sent the Turkish lira and the Istanbul stock market tumbling, the Norwegian fund said its assets there were worth less than the 23 billion kroner they were at the beginning of the year.
“We’ve seen the market rise for a long time, that there are different political and geopolitical events in the world that can affect the market, and we have to be prepared for the fact that (the value of) the fund can go down a lot,” Grande concluded.
The fund’s strong second quarter was attributed primarily to its share portfolio, which accounts for 66.8 percent of its investments and which rose by 2.7 percent.
Real estate holdings, which account for 2.6 percent of its holdings, rose by 1.9 percent, while bond investments, which represent 30.6 percent, remained flat.
Faced with falling oil revenues in recent years, the Norwegian government has been tapping the fund to finance public spending since 2015. But with oil prices recovering, the fund registered its first inflow in three years in June.