Economy

Gold rises on short-covering after falling to four-month low

Gold rises on short-covering after falling to four-month low”

Meanwhile, a firmer dollar and stronger USA bond yields on Tuesday, after a Federal Reserve official backed the case for further interest rate hikes in United States, were limiting upside for gold.

Spot gold was almost unchanged at $1,311.51 per ounce at 0619 GMT. The slight pick up (yesterday) suggests there might have been some opportunistic buying on the part of investors, said National Australia Bank economist John Sharma.

The most active gold contract for June delivery plunged 27.9 US dollars, or 2.12 percent, to close at 1,290.3 dollars per ounce.

A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies, while rising United States yields tend to weigh on bullion's non-yielding appeal.

Higher U.S. interest rates tend to boost the dollar and bond yields, making greenback-denominated gold more expensive for holders of other currencies and denting the appeal of non-yielding assets such as bullion. The dollar hovered near a five-month high against a group of major currencies on Wednesday, as a surge in the benchmark 10-year Treasury yield above 3 percent reignited a rally that had lost steam last week.

Comex Gold
Daily June Comex Gold

While gold prices are likely to be drawing some support from a rift between the US and Iran, investors said easing US-China trade concerns could add downside risks to prices.

"A lot of people are trying to cover shorts from the break at the $1,316 level".

Higher U.S. interest rates, possibly in June at the Federal Reserve's next meeting, will weigh on gold, but analysts say they are unlikely to push gold significantly lower.

"Gold's trading range in the first four months between low and high price was the lowest in percentage terms since it was fixed to the dollar in 1971", Turner said.

In other precious metals, silver was up 0.9 percent at $16.37 an ounce after dipping to a two-week low, $16.17. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.



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