Futures & Commodities

Gold slips on strong dollar but weak US data caps losses

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Gold slipped on Tuesday, pressured by a robust dollar but supported by weak U.S. economic data, with investors awaiting clearer signals on the Federal Reserve's trajectory for interest rates.

Spot gold fell 0.43% at $1,418.63 per ounce, having touched a low of $1,413.80 earlier in the session. Prices briefly popped higher following weaker-than-expected U.S. home sales and monthly manufacturing data from the Richmond Fed.

U.S. gold futures fell 0.51% to $1,419.6

"The Richmond print raised a few eyebrows, though it's really not that important of a figure, but seemed to have triggered some buying," said Tai Wong, head of base and precious metals derivatives trading at BMO.

"Gold is likely to stay within the $1,415-35 range with the market getting all bulled up above $1,430 and hand-wringing below $1,420."

The dollar held near a five-week peak, supported by a deal to extend the U.S. government's debt limit.

"I think gold is locked in a range here," said Ryan McKay, a commodity strategist at TD Securities. "Prices turned around when news of Boris Johnson being elected came in. There are allocations to gold just because of the risk of a no-deal Brexit."

Bullion narrowed losses following news that Boris Johnson, a pro-Brexit conservative, would replace Theresa May as Britain's new prime minister.

Johnson has promised to pull Britain out of the European Union before Oct. 31, either by securing a deal with the EU that is approved by Britain's parliament or leaving the bloc without a deal. Financial markets fear the latter course.

Investors also are eyeing the Fed's July 30-31 policy meeting at which it is expected to cut its overnight benchmark lending rate. The European Central Bank (ECB) is also expected to signal easier monetary policy when it meets on Thursday.

The repricing among investors in favor of a 25-basis-point Fed rate cut instead of a 50-point cut is constraining gold, McKay added.

Meanwhile, silver rose 0.4% to $16.40 an ounce.

"Silver has authenticated gold's rally ... What this has done is put the gold-silver ratio down to a level which you might not ordinarily expect, just below 87," said Ross Norman, chief executive at bullion dealer Sharps Pixley.

Holdings of the largest gold-backed ETF, New York's SPDR Gold Trust, rose 0.6% on Monday from Friday, while the largest silver-backed ETF, the iShares Silver Trust, rose 2.6% during the same period. Holdings in the silver ETF have risen about 10% so far this month.

Among other precious metals, palladium dipped 0.25% to $1,525.50 an ounce, while platinum rose 1.3% to $855.25 an ounce.