Investing.com - Gold prices fell on Monday as the recent Turkish Lira crisis pushed the U.S. dollar higher.
Gold Futures for December delivery on the Comex division of the New York Mercantile Exchange dropped 0.25% to $1,216.1 per troy ounce at 12:10AM ET (04:10 GMT).
The U.S. imposed sanctions and doubled tariffs on the Turkey’s steel and aluminum on Friday to 50% and 20% respectively.
Andrew Kenningham, chief global economist at Capital Economics, said, “The plunge in the lira which began in May now looks certain to push the Turkish economy into recession and it may well trigger a banking crisis.”
In response, Turkey announced on Sunday that it has drafted an economic action plan to ease investor concerns.
"From Monday morning onwards our institutions will take the necessary steps and will share the announcements with the market," Finance Minister Berat Albayrak said, although he did not elaborate on what the steps would be.
Following the news, the U.S. Dollar Index, which tracks the greenback against a basket of other currencies, rose 0.09% to $96.28 on Monday, while euro plunged to its lowest since July 2017.
Elsewhere, reports on Monday suggested that China’s demand for gold is rising. David Harquail, chairman of the World Gold Council (WGC), estimated that gold consumption will continue to grow in China and that it would purchase about 30% of the gold sold globally, in the form of jewelry.
WGC also said that in the second quarter, demand for gold fell by 4% year-on-year globally and purchases for investment purpose also slid 9%, but China’s consumption of gold went up by 7% year-on-year.
Zhu Yi, senior analyst of metals and mining at Bloomberg Intelligence, said, “The [gold] price dropped due to the China-U.S. trade tensions, the growing strength of the U.S. dollar and the depreciation of the RMB will further drive gold demand in the second half [quarter].”