Gold Stalls as Traders Weigh US-China Tensions and Hawkish Fed

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(Bloomberg) -- Gold was little changed as the dollar rose and bond yields retreated, with investors assessing US-China tensions and an apparent hawkish turn from the Federal Reserve.

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Bullion has been drawing some haven support amid the ongoing geopolitical risks. While anxiety has eased slightly in markets, traders are still monitoring the latest developments as China halted some trade with Taiwan in retaliation to US House Speaker Nancy Pelosi’s high-profile visit to the island.

Though the precious metal is on track to rise for two consecutive weeks, it’s down nearly 15% from its March high.

During a Presidential Office ceremony with Taiwanese leader Tsai Ing-wen Wednesday, Pelosi pledged that the US wouldn’t abandon Taiwan, reaffirming support for the democratically elected government in Taipei despite fresh threats of military action by Beijing. Pelosi became the highest-ranking American politician to visit the island in 25 years, prompting China to announce missile tests and military drills.

“With the continuing Russia-Ukraine war, there is an increased sensitivity to geopolitical issues and US-China tensions have kept a floor to gold prices,” said Madhavi Mehta, a senior analyst at Kotak Securities Ltd. “However, it is unlikely that we may see any direct confrontation” between the US and China. As a result, market nervousness may subside soon, she added.

Spot gold was little changed by 1:33 p.m. in New York as Comex futures sunk 0.7%. The Bloomberg Dollar Spot Index was also little changed despite rising 0.8% in the previous session. Silver edged 0.1% down, while palladium took a 2.1% fall.

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