Gold drops to near one-month low as dollar rallies

By Brijesh Patel

(Reuters) – Gold prices fell to a near one-month low on Tuesday as investors took refuge in the dollar after weak Chinese trade data, while caution prevailed ahead of U.S. inflation figures later this week.

Spot gold slipped 0.6% to $1,925.79 an ounce by 01:46 p.m. EDT (1746 GMT), after hitting its lowest since July 10. U.S. gold futures settled 0.5% lower at $1,959.9.

“A lot of nervousness about the global growth outlook and it is probably going to be a lot weaker than people anticipated and that’s triggered a move into the dollar,” said Edward Moya, senior market analyst of the Americas at OANDA.

The dollar rose 0.5% against its rivals, making gold less attractive for other currency holders. [USD/]

All eyes will be on U.S. consumer price index data due on Thursday. U.S. inflation likely accelerated slightly in July to an annual 3.3%, while the core rate was likely unchanged at 4.8%, according to a Reuters poll of economists.

“U.S. inflation report matters, but the one that’s more important is the one we’ll get next month and that will probably suggest that we’re going to see some choppiness in gold in the near-term,” Moya said.

Fed Governor Michelle Bowman on Monday outlined the likely need for additional rate hikes to lower inflation to the Federal Reserve’s 2% target, while New York Fed chief John C. Williams expected rates could begin to come down next year.

Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion.

Reflecting downbeat sentiment in gold, holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, fell to a five-month low on Monday. [GOL/ETF]

“While central banks recorded a record first half in terms of gold demand, traders and investors in futures and ETFs remain sceptical about the current upside potential,” said Saxo Bank’s head of commodity strategy Ole Hansen.

Silver dropped 1.7% to $22.76 per ounce, platinum fell 2% to $901.51 and palladium shed 1.5% to $1,220.99.

(Reporting by Brijesh Patel and Sherin Varghese in Bengaluru; Editing by Krishna Chandra Eluri and Sharon Singleton)