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Futures & Commodities

Gold edges back above $1,200 as dollar rally stalls

Gold edged back above $1,200 an ounce on Tuesday and was on track to rise for the first trading session in eight, recovering losses as the dollar paused in a rally that had taken the currency to 16-month highs.

The dollar has benefited over the last week from expectations for further U.S. interest rate hikes, as well as concerns over Italy's budget and ongoing Brexit talks. However, it ran out of steam on Tuesday.

That caused spot gold to climb to $1,200.30 per ounce, after the metal fell to its lowest since Oct. 11 at $1,195.90 earlier in the day. U.S. gold futures settled at $1,202.40 per ounce.

"The dollar pausing has given gold some room to breathe, especially after a seven-session losing streak," said Tai Wong, head of metals trading at BMO. "The first hurdle for gold is the bottom of the recent range at $1,210."

Gold had traded between $1,211 and $1,243 an ounce for much of the last month before slipping sharply over the last two sessions.

The dollar index, which measures the U.S. unit's performance against a basket of major currencies, eased 0.2 percent, having hit its highest since June 2017 in the previous session.

Dollar strength has outweighed any positive impact of risk aversion on gold, traditionally also seen as a safe store of value in times of market volatility.

The $1,200 level is important psychologically and from a technical point of view, Julius Baer analyst Carsten Menke said.

"It will be quite crucial for gold to keep this level in order to not see bigger downside risks," he said.

Gold posted its biggest weekly drop since August last week after the U.S. Federal Reserve reaffirmed its commitment to tightening monetary policy, a move likely to weigh on interest in non-yielding bullion.

More positively, holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.90 percent to 762.00 tonnes on Monday. Its holdings hit their lowest since early 2016 last month after declining over the summer.

Among other precious metals, silver was up 0.07 percent at $13.97 per ounce, having touched a more than two-month low of $13.92 earlier in the session.

Palladium climbed 1.72 percent to $1,114.30 per ounce, while platinum rose 0.59 percent to $835.70 an ounce.