Gold hovers above $1,200, under pressure from trade tensions

London — Gold prices steadied on Monday as the dollar held near a one-week high on worries over an escalation in trade conflicts between the US and its trading partners.

A firmer US currency makes dollar-priced gold more expensive for holders of other currencies, potentially sapping demand. Safe-haven demand for gold has this year been overshadowed by the metal’s relationship with the greenback.

US President Donald Trump said on Saturday there was no need to keep Canada in the North American Free Trade Agreement and warned Congress not to meddle with negotiations or he would terminate the trilateral trade pact, which also includes Mexico.

Meanwhile, Bloomberg News reported that Trump was prepared to quickly ramp up a trade war with China and had told aides he was ready to impose tariffs on $200bn more in Chinese imports as soon as a public comment period on the plan ends on Thursday.

“For as long as the trade war fears that are helping dollar strength continue, gold is going to come under pressure,” said ETF Securities commodity strategist Nitesh Shah.

Gold prices are down about 8% so far this year against a backdrop of rising US interest rates, trade disputes and the Turkish currency crisis, with investors parking their money in the US dollar.

Spot gold was mostly unchanged at $1,200.47 an ounce at 10.23am GMT, after touching an intra-day low of $1,195.36.

US gold futures were flat at $1,206.70 an ounce.

The dollar index, which measures the greenback against a basket of currencies, was barely changed at 95.171.

If gold recovers to $1,210 an ounce there are good chances of seeing further rebounds to $1,230, said ActivTrades chief analyst Carlo Alberto De Casa. But a decline below $1,200 would see prices test $1,180 and to the following support placed at $1,160, he said.

There was some indication that the bearish sentiment in the market has started to shift slightly as there was a reduction in net short positions in the Comex gold contracts in the week to August 28, the first time in more than a month.

Major US economic data due this week, such as a manufacturing survey on Tuesday and an employment report on Friday, could influence gold’s moves as investors are looking for clues on the pace of US interest rate hikes.

Meanwhile, liquidations continued in SPDR Gold, the world’s largest gold-backed exchange-traded fund. Holdings have fallen over 13% since a peak in late April.

Spot silver was steady at $14.48 an ounce, after earlier falling to its lowest in more than two weeks at $14.37.

Platinum rose 0.2% to $784 an ounce, while palladium was unchanged at $980.10, after hitting a 10-week high on Friday at $984.97.

Reuters