LONDON: Gold prices advanced on Wednesday as the dollar fell and US-China tensions rose, although firmer US Treasury yields capped gains in the non-yielding asset to hold it below a one-month high hit in the last session.
Spot gold rose 0.4% to $1,767.41 per ounce by 1223 GMT, after hitting its highest since July 5 on Tuesday at $1,787.79 before closing down 0.6% to break a four-session winning streak.
US gold futures fell 0.5% to $1,780.50.
“Nancy Pelosi’s visit to Taiwan hasn’t triggered a substantial reaction from Beijing (but) the situation remains tense and is supportive of gold due to its safe-haven status,” said Ricardo Evangelista, senior analyst at ActivTrades.
At the same time, the US dollar started easing, pushing the price of gold higher, Evangelista added.
A softer dollar makes gold attractive for overseas buyers.
China condemned House of Representatives Speaker Pelosi’s trip, the highest-level US visit to Taiwan in 25 years, and responded with a flurry of military exercises, summoning the US ambassador in Beijing, and announcing the suspension of several agricultural imports from Taiwan.
Rupert Rowling, market analyst at Kinesis Money, however, expected the impact of the tensions to be short-lived. “Market focus will return to interest rates and the negative long-term impact that is likely to have on gold,” he said.
A trio of Fed policymakers signalled on Tuesday that more rate hikes were likely in the near term, which lifted benchmark US 10-year Treasury yields and took some of the shine off gold.
In an environment of rising interest rates, gold’s appeal diminishes due to its lack of yield, Rowling said, noting the Bank of England was expected to raise its benchmark rate by 50 basis points on Thursday.
Among other precious metals, spot silver rose 0.5% to $20.06, while platinum eased 0.2% to $892.55. Palladium slipped 1.7% to $2,026.67.
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