Gold retreats as growth risks drive safe-haven bids to US dollar

By Harshit Verma

(Reuters) – Gold slipped to a one-week low on Tuesday on rising bond yields and a jump in the U.S. dollar as investors sought a hedge against global economic growth concerns.

Spot gold was down 0.6% at $1,926.21 per ounce by 2:33 p.m. EDT (1833 GMT). U.S. gold futures settled 0.7% lower at $1,952.60.

Jitters about global growth, particularly in China and the euro zone, caused the safe-haven dollar to hit multi-month highs against a basket of currencies, making gold more expensive for overseas buyers.

“Global bond yields are up sharply across the board and it appears that there are concerns that global growth concerns could get even uglier, and that’s sending everyone back to the dollar,” said Edward Moya, senior market analyst at OANDA.

“The global growth slowdown story will eventually prove to be a positive for gold and that would only come once the market becomes more skeptical about the US recession risks.”

Limiting gold’s downside were trader’s expectations of a 95% chance that the Federal Reserve will leave interest rates unchanged at its Sept. 19-20 policy meeting, and a roughly 60% chance that rates would remain at current levels for the rest of the year, according to CME Group’s FedWatch Tool.

Non-yielding gold tends to lose its appeal when rates rise.

Investors also were focusing on comments by Fed officials this week.

Fed Governor Christopher Waller told CNBC in an interview on Tuesday that the latest round of economic data is giving the central bank space to see if it needs to raise rates again.

“In the meantime, the precious metal is showing signs of exhaustion on the daily charts, with weakness below the 50-day SMA (simple moving average), opening a path back toward $1,920,” Lukman Otunuga, a senior research analyst at FXTM, said in a note.

Silver shed 1.8% to $23.53 per ounce, logging its biggest daily drop in a month.

Platinum dipped 2.6% to $929.54 and palladium eased 0.6% to $1,214.45.

(Reporting by Harshit Verma in Bengaluru; Editing by Shinjini Ganguli, Paul Simao and Shailesh Kuber)