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Gold steady as firmer dollar offsets growth concerns

File photo. Photograph:( Reuters )

Reuters Bengaluru, Karnataka, India Feb 12, 2019, 10.30 AM (IST)

Gold prices held steady on Tuesday as investors kept a cautious stance ahead of a fresh round of Sino-US trade talks, while a firmer dollar capped gains for the bullion, which was drawing support from global economic slowdown worries.

Spot gold was firm at $1,308 per ounce, as of 0341 GMT, after falling 0.4 per cent in the previous session.

US gold futures were also mostly unchanged at $1,312.20 per ounce.

"Gold is being pushed around by the US dollar in the near term. Traders are getting out of anything to do with Europe on concerns of weakness in the region and going for safe-haven buying into US treasuries, which is pushing up the dollar," said Kyle Rodda, market analyst, IG Markets.

When investors buy US Treasury bonds, they are also required to purchase the greenback, which makes dollar-denominated gold more expensive for holders of other currencies, potentially subduing demand.

"Gold is still very resilient and should trade in the range of $1,305 to $1,320, with investors looking for headlines around trade talks, US government shutdown and data from the United States and China for signs of weakness in the economy," Rodda said.

The new round of trade talks between China and the United States started in Beijing on Monday with world's two largest economies trying to hammer out a deal before a March 1 deadline, after which US tariffs on $200 billion worth of Chinese imports are scheduled to increase to 25 per cent from 10 per cent.

Sino-US trade tensions have rattled financial markets since last year and also underpinned the dollar's safe-haven appeal.

The dollar index was steady at 97.05, after advancing 0.4 per cent in the previous session in its largest percentage gain since Jan. 24.

"Ongoing trade tensions and concerns about weaker global economic growth continue to provide a level of support in the gold market," ANZ analysts said in a research note.

Meanwhile, US congressional negotiators said late on Monday they had reached a tentative deal on border security funding that would avert another partial government shutdown due to start on Saturday, but provided no details.

Investors are worried about the economic impact of the US government shutdown when global growth is already lean.

Among other metals, palladium traded steady at $1,385 per ounce, while silver inched up 0.1 per cent to $15.67.

Platinum rose 0.5 per cent to $785.50 per ounce. In the previous session, the metal touched $779.50, its lowest since January 2.