Gold prices hit near 2-month low, likely to stay volatile

The precious metal may once again act volatile from next week as China and US get back to the negotiating table.- Alamy Image

Gold prices on Tuesday hit near two-month low due to stronger dollar, hopes of progress in the US-China trade talks next week and ease in geopolitical tension.
The precious metal is priced at Dh 177.50 for 24K, Dh166.75 for 22K and Dh136.5 for 18K, per gram in Dubai.
Spot gold broke key resistance barrier of $1,460 per ounce and dropped nearly one per cent at $1,459.91 as of 0750GMT after declining to its lowest since August 6 at $1,458.50 earlier in the session. US gold futures fell 0.4 per cent at $1,467.2 per ounce.
Analysts and industry experts said gold is likely to stay volatile ahead of the US-China trade talks next week and may fall towards $1,446. Yellow metal may hit $1,420 level in near term if any signs of easing in the Sino-US tensions emerge and the dollar continues to strengthen, they said.
"Gold prices continued to tumble into Tuesday, moving well away from the short-term support experienced in the previous weeks, and expected to test lower levels," Mihir Kapadia, CEO of Sun Global Investments, told Khaleej Times on Tuesday.
Bullion has lost nearly $100 since scaling a peak of $1,557 early September, largely to due to an uptick in the US dollar. It is still up 14 per cent this year, with earlier gains driven by an escalation in the US-China trade tensions, concerns over global economic growth and prospects of monetary easing by central banks.
Kapadia said a strong dollar and further optimism on a US-China trade war de-escalation has helped promote equity markets, in a further blow to the bullion.
"The precious metal may once again act volatile from next week as China and US get back to the negotiating table, and can further test lower levels under the $1,460s in case of a positive outcome from the talks, and under a strong dollar," he said.
Lukman Otunuga, senior research analyst at FXTM, said gold has stumbled into the final trading quarter of 2019 struggling to nurse wounds inflicted from an appreciating dollar and easing US-China trade tensions.
"Given how prices are trading comfortably below the psychologically $1500 level, the precious metal has the potential to depreciate further in near term with $1455 acting as a level of interest," he said. In the medium to longer term, he said downside losses are likely to capped by core market themes. "Concerns over slowing global growth, political risk in the United States, geopolitical tensions, US-China trade developments, Brexit drama and lower interest rates across the globe should lend a helping hand to the precious metal in the longer term," Otunuga told Khaleej Times on Tuesday.
In regards to the technical picture, he said sustained weakness below $1,485 should inspire a decline towards $1,455 in the near term. "For bulls to jump back into the game, prices need to push back above $1,485," he said.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, said the current geopolitical developments in the Middle East have so far only had a limited impact on gold.
"It is instead the US-China trade talks and the dollar, which hold the key to its outlook. The risk to global growth, which has supported the collapse in global bond yields, has led to renewed rate cuts from major central banks," he said.
From a technical perspective, he said it is also worth keeping in mind that a move down to $1,446 per ounce would be categorised as being a weak correction only within a strong uptrend.
"We maintain a bullish outlook for gold with the combination of a prolonged period of low real yields and slowing growth prospects, made worse among emerging market countries by the strengthening dollar. Adding to this multiple geopolitical risk and a US-China trade deal, which remains far from being finalised," he said.
"The short-term outlook may however turn challenging given the mentioned strengthen of the dollar. Gold's strong rally earlier this quarter occurred despite a stronger dollar. With the dollar index toying with the highest level since early 2017, gold would, if the rally continues, have to put up a strong fight to avoid being dragged down," he said.
muzaffarrizvi@khaleejtimes.com