Economy

Gold inches up as geopolitical tensions rise

Gold inches up as geopolitical tensions rise”

US gold futures for December delivery gained was flat at $1,329.40 U.S.

Low volatility in higher risk assets and a more cautious approach by investors has led to profit-taking weakness in gold this week.

Spot prices hit their highest in more than a year last week at $1,357.54 an ounce on the back of a softer dollar and concerns over North Korea's nuclear ambitions, which knocked stocks sharply lower. Gold dipped in the morning after unexpectedly strong jobs figures and a jump in inflation put a hike in USA interest rates back in focus.

The Fed's next monetary policy meeting is due to begin this coming Tuesday.

While the rebound suggests that the US economy is holding on to underlying momentum, traders should note that the overall demand picture may not lead to an increase in consumer prices.

Investors were eyeing reports on US retail sales, industrial production and consumer sentiment, due later Friday for further indications on the strength of the economy. Domestic producer prices actually came in less than forecast.

The U.S. core consumer price index is expected to have risen 1.6 percent on an annual basis in August which would be the lowest since early 2015, versus 1.7 percent in July.

The Fed is dovish and not likely to raise rates next week.

Gold prices halted a three-day losing streak as the dollar eased despite inflation and jobs data topping expectations pointing to an improving USA economy which could influence the Federal Reserve to stick to its plan to hike rates at least once more this year.

Hedge funds speculating in gold futures and options have built up long positions - bets on a rising price - for seven straight weeks and in a recent commentary Saxo Bank pointed out that the ratio between long and short futures positions is at a near five-year high at 20 longs per 1 short. This move will only slowdown the selling pressure.



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