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Spot gold fell 0.6% to $1,537.20 per ounce at 0728 GMT, but hovered near last week’s $1,554.56, its highest since April 2013.
U.S. gold futures were also down 0.6% at $1,546.6 an ounce.
· U.S. manufacturing activity contracted for the first time in three years in August, data showed on Tuesday, renewing fears of a sharp economic slowdown and weighing on risk sentiment.
The weak data has the increased the possibility of interest rate cut in September, said Jigar Trivedi, a commodities analyst at Mumbai-based Anand Rathi Shares & Stock Brokers, adding trade uncertainties will create buying momentum in gold and silver.
· Traders have almost fully priced in a 25 basis point interest rate cut at the Federal Reserve’s meeting later this month, according to CME’s FedWatch tool.
· Lower interest rates reduce the opportunity cost of holding non-yielding bullion and weigh on the dollar. The dollar index was down0.2% against a basket of currencies.
Since prices have rallied so sharply, there might be profit booking to the levels of $1,510-$1,515, Trivedi said.
· Meanwhile, stock markets in Asia and Europe gained on the back of strong Chinese services sector growth and a report that indicated possible resolution to the Hong Kong protests.
On the trade front, U.S. President Donald Trump’s threatened on Tuesday that he would be “tougher” on Beijing in the second term if talks dragged on.
· British lawmakers defeated Boris Johnson in parliament on Tuesday in a bid to prevent him taking the country out of the EU without a divorce agreement, prompting the prime minister to announce that he would immediately push for a snap election.
With no agreement on the U.S.-China trade front, investors remain nervous, said Michael McCarthy, chief market strategist at CMC Markets, adding that uncertainties following the UK parliamentary vote are a positive for gold.
· Spot gold faces a resistance at $1,546 per ounce, a break above which could lead to a gain into the range of $1,568-$1,595, according to Reuters technical analyst Wang Tao.
· Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 1.34% to 890.04 tonnes on Tuesday, their highest since November 2016.
The 4-hour chart shows the yellow metal has failed at least three times in the last nine days to convincingly break above $1,550.Essentially, the rally has paused around $1,550 and a break above that level is needed for bullish revival. That could happen today as gold's biggest nemesis, the US Dollar index, is looking south, having charted a big inverted bearish hammer candle on the 4-hour chart.On the downside, $1,517 is the level to defend for the bulls. Acceptance below that level would confirm the short-term bullish-to-bearish trend change signaled by last week's bearish inverted hammer and open the doors to $1,480 (Aug. 13 low).
· Spot silver was up 0.5% at $19.33 per ounce, after hitting $19.57earlier, its highest since September 2016.
· Elsewhere, spot platinum rose 0.6% to $963.15 per ounce and palladium was down 0.1% at $1,540.25.
Reference: Reuters, FX Street