Gold prices edged up on Wednesday, drifting near a four-month high hit last week, as the US dollar sank to a fresh three-year low, while worries about potential trade wars led to some risk-aversion trade as well. Spot gold was up 0.1 percent at $1,342.30 per ounce at 0715 GMT, while US gold futures for February delivery rose 0.4 percent to $1,342.30 per ounce.
"Gold could move higher as we are still in the early stages of a broader USD sell-off, with all eyes focused on 110 USD-JPY," said Stephen Innes, APAC head of trading at OANDA. The dollar touched a four-month low against the yen on simmering concerns that the US currency's yield advantage will start to erode as major central banks head toward unwinding their massive stimulus.
"Global investors are also concerned about potential trade wars... which is stirring up some risk-aversion trade, so that, in turn, is supporting gold," said Richard Xu, a fund manager at China's biggest gold exchange-traded fund, HuaAn Gold. Markets also expect an US interest rate hike in March. Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion while boosting the greenback.
Spot gold is biased to break a resistance at $1,341 per ounce and rise towards the September 8, 2017 high of $1,357.54, according to Reuters technical analyst Wang Tao.
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