Futures & Commodities

Gold slips amid recession fears, China-U.S. tensions

Gold bars arranged at the Korea Gold Exchange store in Seoul, South Korea. Gold hit a four-week high on Tuesday, as a weaker dollar and a dip in U.S. Treasury yields boosted demand for the safe-haven metal amid mounting worries over an economic slowdown.
SeongJoon Cho | Bloomberg | Getty Images

Gold traded slightly lower on Tuesday as the U.S. dollar inched higher.

Spot gold traded 0.27% to $1,767.03 per ounce after hitting its highest since July 5 at $1,780.39 earlier in the session.

U.S. gold futures slipped 0.24%, trading at $1, 783.1.

Falling U.S. real rates have supported gold in recent days, and the next data point important for the metal are U.S. payrolls due on Friday, UBS Analyst Giovanni Staunovo said.

However, further interest rate hikes by the U.S. Federal Reserve and declining inflation should weigh on prices over the next six months, Staunovo said.

Benchmark U.S. 10-year Treasury yields hit a four-month low, decreasing the opportunity cost of holding the non-interest-paying bullion, while the dollar index rose 0.2%, having earlier hit a four-week trough.

Gold has benefited from a host of dour economic data recently, with a survey on Monday showing that factories across the United States, Europe and Asia struggled for momentum last month.

Investors are keeping a close eye on macro economic indications since Fed Chair Jerome Powell said decisions on future rates will be determined by incoming data.

Rate hikes by major central banks to combat soaring inflation typically weigh on bullion's appeal.

"Gold could push a little higher towards mid $1,800 because the dollar will continue to weaken over the course of August as a lot of the macro numbers in the U.S. are starting to look worse," said Edward Meir, an analyst with ED&F Man Capital Markets.

Traders are also keeping watch on possible escalation in Sino-U.S. tension, with U.S. House of Representatives Speaker Nancy Pelosi set to begin a visit to Taiwan amid objections from China.