Gold prices fell on Thursday as the dollar strengthened, but uncertainty surrounding the impact of Britain’s departure from the European Union and the upcoming French elections offered some support. Gold is witnessing a correction after failing to break above its 200-day moving average around the $1,260 level, analysts said. “But prices are not likely to witness a big drop particularly because of the Brexit and French elections as they (are offering) very good support for gold at this time,” said Brian Lan, managing director at gold dealer GoldSilver Central in Singapore.
Spot gold was down 0.2 percent at $1,249.85 an ounce by 0419 GMT. U.S. gold futures were 0.4-percent lower at $1,249.30. Prime Minister Theresa May formally began Brexit – Britain’s divorce from the EU – on Wednesday, declaring there was no turning back and ushering in a tortuous exit process that will test the bloc’s cohesion and pitch her country into the unknown.
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“The market seemed to take the notification of the article 50 in the UK relatively smoothly, but I suspect the worst is yet to come on that. We’ll see how negotiations develop and the market is taking the wait and see approach at the moment,” said ANZ analyst Daniel Hynes. “But certainly, there was a tiny bit of safe-haven buying.” Meanwhile, French centrist Emmanuel Macron is on course to come out on top of the first round of France’s presidential election next month and go on to win in the May 7 runoff against far-right leader Marine Le Pen, an Elabe poll showed on Wednesday.
Also pressuring gold was the dollar, with the greenback edged up to a nine-day high against a basket of currencies on Thursday, with the euro sagging as the European Central Bank showed no sign of stepping away from monetary easing anytime soon. A strong greenback makes dollar-denominated gold more expensive for holders of other currencies, potentially decreasing demand.
The dollar was also boosted by Chicago Fed President Charles Evans, who said he was in line with most of his colleagues in supporting further rate hikes this year. In other precious metals, spot silver fell 0.4 percent to $18.12 an ounce, after hitting a four-week high of $18.25 the session before. Platinum rose 0.1 percent to $952.10 per ounce, while palladium was down half a percent at $785.90.
(Reporting by Arpan Varghese and Swati Verma in BENGALURU; Editing by Kenneth Maxwell and Joeph Radford)