Gold ticks up as widespread geopolitical considerations stay in focus

Gold posted modest gains on Tuesday to close near $ 1,080 an ounce

Investing.com — Gold ticked up in spite of a broadly stronger dollar on Tuesday, as widespread geopolitical concerns in the Middle East and fears of slowing global economic growth remained in focus.

On the Comex division of the New York, gold for February delivery wavered between $ 1,072.10 and $ 1,081.50 before settling at $ 1,079.10, up 4.10 or 0.38% on the session. Gold posted its third consecutive winning session and its fifth positive close in the last seven. It followed Monday’s surge when the precious metal jumped by more than $ 15 an ounce, as investors digested news that Saudi Arabia cut diplomatic ties with Iran after protesters stormed the Saudi embassy in Tehran over the weekend in response to the execution of a prominent Shiite cleric. Gold has also risen by nearly 3% in value since a major sell-off last month in the aftermath of the Federal Reserve’s first interest rate hike in nearly a decade.

Gold likely gained support at $ 1,046.20, the low from December 3 and was met with resistance at $ 1,098.80, the high from Dec. 28.

On Tuesday morning, the People’s Bank of China (PBOC) injected the most cash into the nation’s open-market operations since September, one day after weak manufacturing data for December sent Chinese equities crashing, sparking fresh concerns of a further slowdown in the world’s second-largest economy. In its latest effort to bolster its flagging economy, the PBOC offered 130 billion yuan ($ 19.9 billion) of seven-day reverse repo’s on Tuesday at an interest rate of 2.25%. The stimulus measures are aimed at lowering borrowing costs in order to jumpstart activity in an economy that is projected to report its slowest annual growth rate in more than two decades.

The cash injections also fueled speculation that the PBOC could cut interest rates before the start of the Chinese New Year on February 4. Last year, the Chinese central bank slashed interest rates on six different occasions in its most aggressive easing initiative since the height of the Financial Crisis.

China is the world’s largest producer of gold and the second-largest consumer of the precious metal behind India.

Metal traders continued to monitor activities in the Persian Gulf in the wake of the execution of Shiite cleric Sheikh Nimr al-Nimr and 46 others by Saudi Arabia over the weekend. On Tuesday, Iran president Hassan Rouhani said that the Saudi kingdom cannot “cover its crimes of beheading a religious leader in its country,” by severing diplomatic ties. It came one day after a trio of Saudi allies – Bahrain, Sudan and the UAE – joined the kingdom in cutting commercial ties with Iran.

Gold is viewed as a safe-haven asset for investors in periods of increased geopolitical instability.

Investors await the release of the Federal Reserve’s minutes from its December meeting on Wednesday afternoon for further indications on the pace of tightening from the U.S. central bank over the next year. The CME Group’s (O:) Fed Watch tool currently places the probability of a quarter-point interest rate hike at 11% later this month and at 50% for the Federal Open Market Committee’s ensuing meeting in March.

Any rate hikes are viewed as bearish for gold, which struggles to compete with higher yield bearing assets in rising rate environments.

The , which measures the strength of the greenback versus a basket of six other major currencies, rose by more than 0.65% to an intraday high of 99.53. The index is on pace for its sixth straight winning session. Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.

Silver for March delivery added 0.144 or 1.04% to 13.985 an ounce.

Copper for March delivery rose by 0.016 or 0.76% to 2.094 a pound, rebounding from Monday’s sell-off when it plummeted more than 2.35%. China is the world’s largest consumer of , accounting for more than 40% of the world’s total consumption.

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Gold ticks up as widespread geopolitical considerations stay in focus