Gold eases as dollar hovers near 2-year high

Gold prices eased on Thursday as the dollar remained near a two-year high hit in the previous session, while a dip in equities and weak data from Germany augmented worries about the pace of global growth and cushioned losses in the safe-haven bullion.

FUNDAMENTALS

Spot gold was down 0.1 per cent at $1,274.21 per ounce, as of 0106 GMT.


US gold futures slipped 0.2 per cent to $1,276.40 an ounce.

The euro nursed losses against the dollar on Thursday after dipping to a 22-month low on a surprise drop in a leading indicator for economic activity in Germany, amplifying worries of a growth slowdown in Europe's largest economy.

The dollar rallied to a 23-month high of 98.189 against a basket of key rivals.

Asian shares eased in early trade on Thursday after data showed a surprise deterioration in German business morale, raising fears of slowing global growth and weighing on a gauge of world equity markets, including Wall Street.

German business morale deteriorated in April, bucking expectations for a small improvement, as trade tensions hurt the industrial engine of Europe's largest economy, leaving domestic demand to support slowing growth.

Gold is often used as a hedge against economic and political uncertainties.

The Bank of Canada held interest rates steady on Wednesday as expected but removed wording around the need for future hikes and lowered its growth forecast for 2019, cementing the market's view that further increases are off the table for now.

US Treasury yields were lower across maturities on Wednesday as investors piled into the safe-haven government bonds following a dovish report from Canada's central bank, weak data from Germany and Australia, and solid demand at auction for $41 billion of new five-year notes.

Billions of dollars' worth of gold is being smuggled out of Africa every year through the United Arab Emirates in the Middle East - a gateway to markets in Europe, the United States and beyond - a Reuters analysis has found.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.23 per cent to 747.87 tonnes on Wednesday from 749.63 tonnes on Tuesday.

Iranian Foreign Minister Mohammad Javad Zarif does not believe US President Donald Trump wants war with Iran, but he told Reuters on Wednesday that Trump could be lured into a conflict.