Gold drifted down on Wednesday as Chinese demand ebbed ahead of the Lunar New Year festival, with some analysts warning of further declines as prices for the metal could be due a technical correction.

That came after bullion touched two-month highs earlier in the week, buoyed by a weaker dollar and uncertainty over the policies of U.S. President Donald Trump.

Spot gold had fallen 0.5 percent to $1,202.90 per ounce by 0617 GMT. U.S. gold futures shed 0.7 percent to $1,202.90.

“(Gold was) unable to capitalise on a softer dollar with Chinese physical demand beginning to wane as we head ever closer to the New Year holiday period,” MKS PAMP Group trader Sam Laughlin said in a note.

The dollar index, which measures the greenback against a basket of currencies, fell 0.1 percent to 100.270.

Spot gold is due for a deep correction, following its failure to break strong resistance at $1,219 per ounce, said Reuters technical analyst Wang Tao.

“Gold prices have moved higher since the beginning of the year and need some technical correction in the very short-term,” said Jiang Shu, chief analyst at Shandong Gold Group.

“Gold might test levels of $1,185 during the (Lunar New Year) period.”

The metal has rallied about 8 percent since mid-December, fuelled by worries over Trump’s policies. Gold is often seen as a safe-haven investment in times of geopolitical and financial uncertainty.

Source: Reuters UK

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