Gold prices steadied near 18-month lows on Tuesday, attempting a break back above the key $1,200 level as the dollar eased and analysts said the precious metal could have fallen too far.
Spot gold edged up 0.1% to $1,195.16 an ounce by 10.34am GMT. In the previous session, the bullion hit $1,191.35, its lowest since January 30 2017. US gold futures were up 0.3% at $1,202.10 an ounce.
The dollar, in which commodities such as gold are priced, edged lower against a basket of its peers as the Turkish lira regained its footing, easing concerns of a negative ripple effect on global markets.
“A lot of investors got very disappointed because they thought that gold would be the safe haven in trade conflict and also with Turkey and emerging markets — and it wasn’t,” said Georgette Boelle, commodity strategist at ABN AMRO. “It’s still very difficult to point out where the low is going to be but we are in cheap territory and gold should start bottoming out at these levels.”
Gold, which is down about 8% this year, has faced a slate of headwinds in 2018 including rising US interest rates, a soaring dollar and a failure to capitalise on its traditional role as a hedge against risk amid global uncertainty.
Instead, investors have opted for US Treasuries, seen as the ultimate safe haven, which meant they had to buy dollars.
The bearish stance on gold continued to be reflected in record short positions and in the outflow of gold exchange-traded products.
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.19% to 784.60 tonnes on Monday from Friday. Holdings have fallen about 10% from their peak in April and are at their lowest since February 2016.
Some investors have the high level of shorts and low positioning in exchange-traded funds (ETFs) as an indication that gold is due for a turnaround as it is oversold.
“Gold is a proven inflation hedge and a safe-haven asset in the case of shocks to economic growth, and we believe that current weakness presents an opportunity to benefit from the recovery of this undervalued sector,” said David Baker, fund manager and managing partner at Baker Steel Capital Managers.
In technicals, next support for gold is at $1,180, a low hit in January 2017, said ActivTrades chief analyst Carlo Alberto De Casa, adding that the lack of a rebound suggested the main trend remained bearish.
Spot platinum rose 0.3% to $800.50, after dropping 3.6% to a three-week low at $791.50 on Monday. Silver rose from a more than 13-month low of $14.94 in the previous session. On Tuesday it was up 0.6% at $15. Palladium rose 0.2% to $892.20.