Gold hits nine-month trough on dollar strength

Gold hits nine-month trough on dollar strength
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BENGALURU (July 12): Gold hit a new nine-month low on Tuesday (July 12) as the US dollar at a 20-year high stifled demand for bullion, but a slight recovery in the euro against the greenback limited further losses.

Spot gold was up 0.1% at US$1,734.97 (about RM7,698.24) per ounce as of 0229 GMT after hitting its lowest since Sept 30 of US$1,722.36 earlier in the session.

US gold futures firmed 0.2% to US$1,734.20.

"Gold looks like it is trading in direct correlation with EUR/USD (the euro/US dollar) in Asia," finding some support as the euro recovered slightly, but if EUR/USD falls through 1.0000 in Asia, gold could drop towards US$1,700," OANDA senior analyst Jeffrey Halley said.

The euro was near parity to the dollar amid concerns that an energy crisis could tip Europe into a recession, while the US Federal Reserve continues to aggressively tighten policy to curb inflation.

Strength in the dollar makes greenback-priced gold more expensive for buyers holding other currencies.

US Consumer Price Index data, a key measure of inflation, is due on Wednesday and expected to show prices rose 8.8% in June from a year earlier.

Recent inflation data has not been encouraging, Atlanta Fed president Raphael Bostic said on Monday, adding that the lack of month-to-month improvement in the pace of price increases warrants another 0.75-percentage-point increase in the federal funds rate when policymakers meet later this month. 

Higher interest rates increase the opportunity cost of holding bullion, which yields no interest.

Benchmark US 10-year Treasury yields eased, somewhat buoying demand for gold.

"Gold seems to have found a few friends near US$1,730 over the last couple of days, without ever seriously looking like it would reverse its recent sell-off," Halley said.

Spot silver rose 0.3% to US$19.14 per ounce, platinum dipped 0.7% to US$863.82 and palladium dropped 1% to US$2,140.80.