Gold falls to 1-week low on stronger dollar, but holds above $1,300 level

Gold fell to a more than one-week low on Thursday, pressured by a stronger dollar, but worries over slowing global economic growth and the spectre of another US government shut-down kept the safe-haven metal above the key $1,300 level.

Spot gold fell 0.1 per cent to $1,304.25 per ounce by 0730 GMT, after touching its lowest since Jan. 29 at $1,302.11. Prices fell 0.7 per cent in the previous session, in their biggest one-day drop since January 18.

US gold futures were down 0.4 per cent at $1,308.70.

“Reserve Bank of Australia's comments were seen as a significant walk back. Markets didn't like that as it stokes global slowdown concerns, which saw dollar gaining and gold moving down,” said Ilya Spivak, a senior currency strategist with DailyFx.

“It is really difficult for gold to find lasting support here as the dollar looks strong.”

Australia's central bank on Wednesday opened the door to a possible rate cut as it acknowledged growing economic risks in a remarkable shift from its long-standing tightening bias that sent the local dollar sliding.

The dollar index, a gauge of its value versus six major peers, was hovering close to its two-week high. A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies.

Last week, the US Federal Reserve said it would be patient on further rate hikes, while the European Central Bank sounded less certain that it would start tightening policy later this year.

The Bank of England looks set to trim its forecasts for Britain's already sluggish growth on Thursday, reflecting the approach of a still uncertain Brexit in just 50 days' time and a slowdown in many of the world's big economies.

“Bullion appeal though demonstrating for pricing weakness in the current term, will hold an integral role in 2019 amidst heightened geopolitical and economic uncertainties,” analysts at Phillip Futures wrote in a note.

Wall Street's benchmark S&P 500 slipped amid concerns over growth, disappointing earnings reports and another possible US government shut-down in the wake of President Donald Trump's State of the Union address.

“If there is another shut-down, that would stoke concerns about growth, which might fuel demand for haven assets,” Spivak of DailyFx said, adding gold's ability to move higher will be limited if the dollar finds haven appeal.

Reflecting lacklustre sentiment in gold, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell for a fourth straight session on Wednesday.

Liquidity in gold markets is expected to remain light in Asian hours with China closed for the Lunar New Year holiday this week.

In other metals, palladium was steady at $1,372.45 per ounce. Silver was up 0.1 per cent at $15.68, and platinum fell 0.4 per cent to $800.