Fresh round of trade hostilities puts pressure on gold

Bengaluru — Gold prices came under pressure on Wednesday as news that the Trump administration has plans to propose higher tariffs on Chinese goods stoked demand for the dollar.

The dollar edged up on the yuan and growth-leveraged currencies after a source said on Tuesday that the White House was about to propose a 25% tariff on $200bn of imported Chinese goods after initially setting them at 10%, sparking a new round of trade hostilities in the US-China tariff spat. A stronger dollar makes greenback-denominated gold more expensive for holders of other currencies.

Spot gold was down 0.1% at $1,221.78/oz at 3.53am GMT, after gaining slightly in the previous session. US gold futures were about 0.2% lower at $1,221.90%.

The slight uptick in gold prices on Tuesday night came from safe-haven demand, but the weakness this morning was predicated on the dollar, OCBC analyst Barnabas Gan said. “The trade tensions are also fuelling safe-haven flows into the dollar. The greenback still appears to be the preferred safe haven rather than gold,” Gan said.

Asian stocks rose in early trade on a report that the US and China were seeking to resume talks to defuse trade tariff issues, before paring gains.

Meanwhile, investors waited for the outcome of a two-day US Federal Reserve monetary policy meeting for outlook on interest rates.

The Fed is expected to keep rates unchanged, but solid economic growth combined with rising inflation are likely to keep it on track for another two hikes this year even as President Donald Trump has ramped up criticism of its push to raise rates.

“Tonight’s FOMC [Federal open market committee meeting] is likely to be watched for cues and comments from Fed officials on future rate hikes and monetary policy stance for the rest of the year,” Gan said.

Higher US interest rates tend to boost the dollar and pressure gold.

Spot gold looked neutral in a range of $1,214/oz-$1,226/oz, Reuters technicals analyst Wang Tao said.

In other precious metals, silver fell 0.2% to $15.48/oz.

Platinum and palladium were both 0.1% higher at $835.50/oz and $930.60/oz, respectively.

Reuters