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Bookmark* Dollar index near 13-month lows
* Gold resistance at $1,275 Fibonacci level
* Gains capped by weak physical demand
(Updates prices)
By Pratima Desai
LONDON, July 31 (Reuters) – Gold hit its highest in almost
seven weeks on Monday, boosted by a struggling dollar and U.S.
economic data that has cast doubt on whether the Federal Reserve
will raise rates again this year.
Spot gold was down 0.1 percent at $1,267.7 an ounce
at 1337 GMT from an earlier $1,270.98, its highest since June
14. It is on course for a two percent rise this month. U.S. gold
futures fell 0.1 percent to $1,267.1 an ounce.
“Dollar weakness is driving the gold price. It’s not just
against the euro, it’s against most major currencies,” said
Commerzbank analyst Eugen Weinberg. “U.S. politics is a mess and
U.S. data has not been inspiring.”
A U.S. currency near 13-month lows against a basket of
currencies makes dollar-denominated gold cheaper for holders of
other currencies, which could mean stronger demand.
Analysts said decelerating wage growth and subdued inflation
have weakened the case for another rate rise this year. The Fed
has raised rates twice this year.
Hopes that President Donald Trump’s administration will
implement tax reforms and economic stimulus in the near future,
seen as dollar-positive factors, faded after the U.S. Senate on
Friday failed to dismantle Obama care, in another political
setback for the president.
“We think that there is more upside on gold,” said INTL
FCStone analyst Edward Meir in a note. “A combination of a
weaker dollar and falling U.S. bond yields should propel the
precious metal higher, with North Korea being a wild card.”
Japanese Prime Minister Shinzo Abe on Monday agreed with
U.S. President Donald Trump on the need for more action on North
Korea after Pyongyang fired a second intercontinental ballistic
missile on Friday.
However, weak physical demand is expected to limit gold’s
gains. Gold prices in India last week recorded the biggest
discount in seven months as a rebound in prices curtailed retail
demand, while lower premiums in other Asian centres failed to
lure customers amid a seasonal slowdown.
On the technical front, upside resistance comes in at
$1,275, a Fibonacci retracement level. A break above that could
see gold making a move towards the year high above $1,295.
Elsewhere, silver gained 1 percent to $16.83 an
ounce, palladium rose 1.6 percent to $891.22 and platinum
climbed 0.9 percent to $937.30.
“Stronger European auto demand is doing little to help
platinum, as the sector seems well supplied,” Meier said.
Moreover, platinum is struggling with longer-term structural
demand issues.”
Demand for platinum used in autocatalysts could come under
pressure due to a push towards electric cars powered by
rechargeable batteries and away from vehicles with internal
combustion engines that use diesel.
(Additional reporting by Nithin Prasad in Bengaluru; Editing by
Louise Heavens and David Evans)
