Gold prices fell on Thursday as the dollar gained ground after data showed strong growth in the United States, but losses were capped by rising security concerns created by tensions on the Korean peninsula.
The US currency rose after data showed the US economy grew at an annual three per cent in the second quarter, making dollar-denominated gold more expensive for holders of other currencies.
Spot gold was down 0.1 per cent at $1,306.80 an ounce at 1151 GMT, but on track for a near 3 per cent rise this month.
US gold futures eased 0.1 per cent to $1,311.70. Gold prices are up around 13 per cent so far this year.
Some of that gain came after North Korea fired a missile over Japan. That was followed two days later by South Korea’s air force conducting an exercise with two US nuclear-capable bombers above the Korean peninsula on Thursday.
“The situation in Korea encouraged interest in gold and the weaker dollar has lifted gold,” Oxford Economics commodities analyst Dan Smith said.
“We don’t know what’s going to happen with geopolitics, but we seem to be in a fairly stable environment in terms of the macro picture, which should mean limited upside for gold.” Oxford Economics expects gold price to average $1,265 in the fourth quarter and $1,270 next year.
But some analysts say subdued inflation in the United States could mean the US Federal Reserve delays monetary policy tightening, which may lead to further losses for the dollar already near its lowest since early 2015.
The Fed’s preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, rose 0.9 per cent in the second quarter, its slowest in more than two years.
Holdings of gold in physically-backed exchange traded funds jumped to 54.176 million ounces on Monday, up more than two per cent since August 9, but the last couple of days has seen investors sell, albeit small amounts.
On the technical front, attempts to break towards Monday’s 9-1/2 month high above $1,325 face resistance at $1,312, the upper Bollinger band. Support at $1,300 is reinforced by a/sFibonacci retracement level at $1,297.
“The North Korean missile test ... helped gold burst decisively through $1,300 an ounce triple-top resistance, INTL FCStone analyst Edward Meir said. “It will be interesting to see if further chart-based buying materialises now that this triple-top has been breached, especially on any dips.”
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