Gold dips further as dollar soars and US-China trade sparring escalates

London — Gold lost further ground on Wednesday after hitting a six-month low in the previous session and as the dollar scaled an 11-month peak on escalating trade tensions, while platinum hit a two-and-a-half-year trough.

Trade tensions between the US and China are showing no signs of easing. On Tuesday, a White House trade adviser said that Beijing has under-estimated the US president’s resolve to impose more tariffs. This was after Washington, on Monday, threatened to impose a 10% tariff on $200bn of Chinese goods after Beijing decided to raise tariffs on $50bn of US goods in response to similar tariffs on Chinese goods announced Friday.

Gold, seen as a safe-haven asset, usually gains from geopolitical or economic tensions, but has struggled this time around because the dollar has risen strongly, making dollar-priced gold costlier for non-US investors.

“Gold is not in a good position with the [US Federal Reserve] hiking [rates] and the dollar strengthening, but the reason it hasn’t fallen as much as you’d expect is that safe-haven demand has sustained the price,” said Capital Economics analyst Simona Gambarini.

Spot gold was down 0.2% at $1,272.52 an ounce, as of 10.19am GMT. The metal fell to its lowest since December 22 at $1,270 an ounce on Tuesday. US gold futures for August delivery were down 0.3% at $1,274.20 an ounce.

In the wider markets, equities stabilised after Tuesday’s plunge on US-China trade war woes, with signs of Chinese market support and speculation about some monetary policy easing there helping a rebound in Shanghai. Rising equities tend to indicate more appetite for riskier investments and can weigh on safe havens, such as gold.

Platinum declined 0.7% to $861.70 an ounce. Earlier in the session, it touched $854.50, its lowest since February 3 2016.

Julius Bär said in a note that platinum remained under pressure from trade tensions and related fears of a slowdown in global growth, but added it does not see further downside at these levels.

“Platinum still suffers from the diesel emission scandal and faces a depreciating South African rand, which lowers dollar-denominated costs [for] South African producers. While the market should remain well supplied against this backdrop, we believe this is reflected in extremely negative sentiment in the futures market. Hence, we maintain a neutral view.”

Silver dipped 0.2% at $16.25 an ounce. In the previous session, it hit $16.21, its lowest since May 16. Palladium edged up 0.1% at $967.80, having earlier hit its lowest since mid-May.

Reuters