Gold slips towards one-year lows as dollar revives

By Peter Hobson

LONDON (Reuters) - Gold prices on Monday slipped towards one-year lows as the dollar strengthened again, making bullion more expensive for buyers using other currencies.

Gold has tumbled 10 percent since mid-April, driven lower by a surge in the U.S. currency.

Bullion was given respite last week when U.S. President Donald Trump branded the dollar's strength bad for the U.S. economy, knocking the currency down from one-year highs.

But the breather proved short-lived, with the greenback climbing again against the currencies of key gold-consuming markets China, India and the euro zone.

"For gold to rise in a big way, we really need to see the dollar start to show some weakness," Saxo Bank analyst Ole Hansen said.

 

Spot gold was down 0.1 percent at $1,230.24 an ounce at 1104 GMT, moving closer to last Thursday's low of $1,211.08.

U.S. gold futures for August delivery were also down 0.1 percent at $1,230.20 an ounce.

A war of words between Trump and Iranian President Hassan Rouhani helped to lift prices only briefly.

Trump, in a tweet, told Rouhani on Sunday to "NEVER, EVER THREATEN THE UNITED STATES AGAIN" after Rouhani said hostile U.S. policies towards Tehran could lead to "the mother of all wars".

Geopolitical instability often boosts gold, traditionally seen as a safe place to invest in times of uncertainty.

Despite a slight rise late last week, gold holdings at exchange-traded funds tracked by Reuters have fallen 5.3 percent, or 2.4 million ounces, since mid-May as investors choose other asset classes.

"It (gold) still trades in 'currency mode' rather than 'commodity mode' as investment demand remains too soft to push prices higher," Julius Baer analyst Carsten Menke said.

One potential positive is a swing in speculative positioning that has seen the net short on the Comex exchange grow to the largest since January 2016.

The unwinding of that 2016 short position between January and July that year helped drive gold up more than $300 to a two-year high.

"Such extreme positioning has frequently been an indicator of a pronounced counter movement in the near future," Commerzbank analysts wrote.

Gold is also cushioned by technical support around $1,200-$1,220, including its July 2017 low of $1,204.90, the 50 percent Fibonacci retracement of the 2016 rally and the psychologically significant level of $1,200.

Silver was up 0.1 percent at $15.49 an ounce, though it remains near its lowest since July last year.

Palladium was down 0.3 percent at $891.05 an ounce, near one-year lows, while platinum was 0.4 percent higher at $830.16 after touching its lowest since 2008 last week.

(Reporting by Karen Rodrigues in Bengaluru; Editing by Dale Hudson)