Gold price retreats after safe haven appeal hit by strong dollar

NEW YORK/LONDON: Gold prices fell 0.5 percent on Tuesday, retreating a bit from the previous day's rally as a stronger US dollar reduced the appeal of safe-haven investments, and oil prices also dipped.

On Monday, bullion rose as much as 1 percent for its biggest daily rise in six weeks, after news of a string of high-profile arrests in Saudi Arabia boosted oil to a 2-1/2-year high. Tuesday`s retreat from that rally stayed within a USD 20 range, noted Bill O’Neill, partner at Logic Advisors in Upper Saddle River, New Jersey.

"Gold stuck within the USD 1,260-USD 1,280 range," he said. "The overall atmosphere for gold right now is not particularly positive. The safe-haven demand just isn`t there."

Spot gold was down 0.5 percent at USD 1,275.30 an ounce, while US gold futures for December delivery settled down USD 5.80, or 0.5 percent, at USD 1,275.80 per ounce.

The dollar rose 0.3 percent versus the euro as investors bet that monetary policy would continue to diverge between the United States and the euro zone.

Oil prices retreated after rallying Monday on an anti-corruption purge led by Saudi Arabia`s Crown Prince Mohammed bin Salman. Some of the kingdom`s political and business elite were arrested.

Gold and crude oil are priced in US dollars. A stronger dollar can pressure prices of dollar-priced commodities, which become more expensive to investors using other currencies.

On Monday, gold also drew support from jitters linked to US President Donald Trump's trip to the Far East, MKS`s head of trading Afshin Nabavi said. Trump`s visit to South Korea could provide gold with some support in coming days, traders said.

Among other precious metals, silver was down 1.6 percent at USD 16.96 an ounce. Its session high of USD 17.27 was the highest since October 20.

Silver outstripped gains in gold during Monday`s rally, ending the day 2.5 percent higher. That pushed the gold/silver ratio to its lowest since mid-September at 74.39.

"Not only was silver pulled up by gold yesterday – its gains were also twice as pronounced," Commerzbank said in a note. "Silver ... is only just below the 200-day moving average. Any rise above this mark could spark technical follow-up buying and lend further buoyancy to the silver price."

Platinum was down 1.3 percent at USD 922.40 an ounce, while palladium was down 0.4 percent at USD 995.60 per ounce.