Gold Prices Edge Lower, Dollar Revival Continues To Sap Support

Renewed dollar gains have triggered some selling pressure on gold, although overall selling pressure has remained limited amid underlying reservations surrounding North Korea.

Gold prices found support below $1,325 per ounce in US trading on Tuesday and edged higher to the $1,330 area with solid underlying backing at lower levels.

Although the dollar maintained a firm tone, the US currency was unable to extend its best levels as the trade-weighted index hit selling interest above 92.0.

In this context, gold was resilient even with a further increase in bond yields.

Overall risk conditions held firm which limited potential defensive demand for defensive assets.

Prices edged higher to near $1,335 in Europe on Wednesday, although there was no major buying interest.

Underlying tensions surrounding North Korea were still an important factor which curbed potential selling on gold.

There was only a very limited impact from the US producer prices data with the monthly increase slightly lower than expected at 0.2% while the underlying increase of 0.1% was slightly below consensus forecasts of 0.2%.

The dollar initially edged lower which underpinned gold, although the US currency made net gains during the US session.

There were reports from Washington that Republican tax plans would be available in the week beginning September 25th which triggered a further net dollar advance as USD/JY advanced to test the 110.50 level.

Treasuries also edged lower which pushed gold to below $1,325 per ounce, although losses were still limited with underlying resilience.

Gold will tend to gain fresh support if there is a low CPI inflation reading on Thursday, although the dollar may prove resilient if US tax plans gain traction.

Tim is a contributing author to EconomicCalendar.com. He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.