“The further escalation of trade war is mutually destructive given the higher US consumer prices as a result of import tariffs, which in turn could fuel the risk of a faster-than-expected Fed rate hike in the foreseeable horizon,” OCBC said in a note.
A stronger dollar and higher interest rates reduce demand for non-interest bearing gold as the metal becomes more expensive for holders of other currencies.
Spot gold may break a support at $1,237 per ounce and fall more towards the next support at $1,226, Reuters technicals analyst Wang Tao said.
In other precious metals, silver was 0.2 percent higher at $15.78 an ounce. It fell to its lowest since mid-December at $15.72 an ounce, earlier in the session.
At this time, the market is still weak trading beneath last month’s low. Taking a broader view, this market is in a downward trend on all our indicators. On the subject of the direction of this trend, we have been moving down for the past 2 months and the last monthly level low was 104540, which formed during December 2015 and generated a new sell signal the first week of May.
Critical support still underlies the Gold market at 1238.20 and a break of that level on a monthly closing basis would warn of a further decline ahead becomes possible.