Gold prices inch down as dollar creeps away from multi-month lows

Gold prices edged lower on Wednesday as the dollar took a breather after plunging to multi-month lows, although fading prospects for U.S. monetary tightening this year and political gridlock in Washington continued to pressure the greenback.

The dollar stayed on the defensive and remained near over 10-month lows as investors wagered any further tightening in the United States would be slow at best, while optimism on China`s economy underpinned Asian shares and commodities. [USD/] [MKTS/GLOB]

"We still remain somewhat neutral on gold this year despite a rather good run of late," said Edward Meir, analyst at INTL FCStone. "Still, we are not overly bearish on the precious metal at this stage either, as the backdrop of a falling dollar is too difficult to ignore."

Weighing on the dollar was the collapse of Republican efforts to overhaul or repeal Obamacare in the U.S. Senate on Tuesday, dealing a sharp setback to Trump and the Republican Party`s seven-year quest to kill former President Barack Obama`s signature healthcare law.

"The recent strength (in gold prices) is due to currency dynamics more than anything else," said Mark Keenan, commodity strategist at Societe Generale.

"We continue to forecast lower prices moving forward," Keenan said.

Spot gold fell 0.2 percent to $1,240.11 per ounce at 0702 GMT. In the previous session, it hit its highest since June 30 at $1,244.56.

U.S. gold futures for August delivery fell 0.2 percent to $1,239.50 per ounce.

"We think the market may have done too much, too quickly for the time being and may be in store for a breather," Meir said.

Spot gold may rise more to $1,250 per ounce, as it has cleared resistance at $1,239, according to Reuters technical analyst Wang Tao.

"Support appears at the 200-day moving average around $1,230 an ounce," said analysts at ScotiaMocatta, adding that they would remain bullish on gold as long as it closes above that level.

Meanwhile, holdings at the SPDR Gold Trust, the world`s largest gold-backed exchange-traded fund, fell 0.68 percent to 821.45 tonnes on Tuesday from 827.07 tonnes on Monday.

In other precious metals, silver dropped 0.1 percent to $16.24 per ounce, after touching its highest in about two weeks in the previous session.

Platinum eased 0.4 percent to $918.45 per ounce. On Monday, it marked its highest since mid-June.

Palladium fell 0.3 percent to $860.55 per ounce.

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)