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Gold prices fell to a one-week low as investors hedged in US dollars

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Gold prices edged lower on Tuesday falling to a one-week low as investors hedged in US dollars against trade tensions between the United States and China.

The price of spot gold was down by 0.2% at 1,276.72 USD per ounce, after earlier fell to its lowest level since May 23 at 1,274.44 USD. Meanwhile, the US gold futures edged lower by 0.4% to 1,281.40 USD per ounce.

The strong US dollar, which rose close to its 2-year high, is weighing on the gold prices. The dollar has been strong lately and it seems that investors prefer to hold US debts and other low risk serving bonds as opposed to gold. However, the precious metal is strongly supported at current price levels and no further declines are expected in the short term.

The dollar index climbed to a one-week high and was hovering within striking distance of a two-year high of 98.371 hit a week ago. The Sino-American trade tensions prompted investors to seek a safe haven in the greenback and government bonds.

With bond yields so low and weakening equity markets, the gold could find support. As long as the price remains above 1,265-1,270 USD, the gold will rally back to 1,306 USD and 1,316 USD levels, according to the analysts.

Meanwhile, holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose by 0.5% to 740.86 tonnes on Wednesday. Despite Wednesday’s rise, SPDR gold holdings have fallen more than 6% so far this year.

Among other precious metals, silver was steady at 14.42 USD per ounce. The metal had dropped to 14.25 USD on Tuesday, which was its lowest level since early December. Platinum inched down by 0.1% to 791.07 USD per ounce, after earlier falling to its lowest since February 15 at 785.50 USD. Palladium slipped by 0.5% to 1,343.40 USD per ounce.

Gold price analysis

Commodity markets are a little calmer today, with stocks on the rebound and safe haven assets retreating. Gold, which failed to find any meaningful support from the escalation in US-China trade spat, was lower again.

Unless it stages a surprise rally in these last two days of May, it will close lower for the fourth consecutive month.

gold futures

If the metal does go lower the first objective would be the liquidity below this year’s earlier low at 1,266 USD. Below there are a couple of retracement levels to watch, with the mid-point of the range from the August low coming in at 1,253-1,254 USD. Meanwhile, short-term resistances to watch include 1,280 USD, 1,285 USD and 1,293 USD, levels which were previously supported.

The gold traders are expected to turn bullish again after the commodity rise back above that 1,300 USD hurdle and stay above it, or print a bullish reversal at lower levels first.

Silver price analysis

After hitting 14.28 USD, its lowest since December 3rd, silver rebounded and traveled somewhat higher to challenge the 14.47 USD level yesterday. The metal slid thereafter but found support near 14.35 USD today, and slightly bounced again. That said, despite the latest recovery, the price structure continues to be of lower peaks and lower troughs below the downtrend line taken from the high of March 21st. Thus, we would still consider the near-term picture to be negative.

silver futures

The price could continue traveling higher for a while more, perhaps to challenge the 14.47 USD level again, or even trade a bit higher. However, as long as it stays below the downtrend line, we would still see a decent chance for the bears to jump back into the action and aim for another test near 14.28 USD, which is Tuesday’s low.

A decisive dip below that hurdle would confirm a forthcoming lower low and may pave the way towards the 14.20 USD zone, defined by the low of December 3rd.