Gold rises to near two-month high of around US$4,400 as weak US retail data weighs on US dollar

GOLD extended a two-week advance on Monday (Aug 17) as weaker US retail sales data weighed on the US dollar, making bullion cheaper for most buyers.

The yellow metal was trading near US$4,400 an ounce, after ending the previous week almost 1 per cent higher. Latest US data showed declines in both consumer sentiment and retail sales, helping to ease fears of an imminent rate hike, which is typically a headwind for non-yielding bullion.

A gauge of the US dollar was down by 0.2 per cent on Monday, making bullion that has priced in the currency cheaper. The yield curve – referring to the gap between the long-term and short-term US Treasury yields – was also steepening.

Still, volatility continued to shroud the global energy supply outlook, showing that the risk of monetary tightening has not gone away. More ships came under attack in the Strait of Hormuz late in the week ended Aug 16, while the US said it was preparing to impose new measures aimed at crippling Iran’s economy.

Some vessels exiting the strait with satellite transponders turned off have helped to keep global energy prices in check. Iran and Oman also appear to be edging closer to a deal on how the critical waterway should be managed, although the US is not party to those talks.

Gold’s recovery above the key US$4,000-an-ounce threshold in recent weeks has been driven by renewed investor appetite and an increase in central bank purchases, notably from China.

Gains in the week ended Aug 16 took the metal above its 100-day moving average for the first time since April, and it continues to hover near that level.

Bullion “will require a meaningful break above US$4,400 to confirm that its positive momentum has further room to run,” said Justin Lin, an analyst at Global X ETFs.

“The recent bounce, while mostly driven by technicals, has also priced in most of the positive catalysts from the past week, so we may see gold trade relatively flat” until the next clear catalyst, he added.

The minutes of the Fed’s July policy meeting due on Wednesday are set to provide some clarity on rate considerations.

Spot gold was 0.4 per cent higher at US$4,391.60 an ounce at 10.50 am in Singapore. Silver rose 1.3 per cent to US$65.54 an ounce, after gaining almost 2 per cent in the week ended Aug 16. Platinum and palladium advanced. The Bloomberg Dollar Spot Index, a gauge of the US currency, was down 0.1 per cent. BLOOMBERG