Gold falls to one-week low as Mexico tariff boosts risk appetite

Bengaluru — Gold fell to a one-week low on Tuesday as the US halted its plans to impose tariffs on Mexico, boosting appetite for riskier assets such as equities at the expense of alternatives, such as bullion.

Spot gold was down 0.4% at $1,322.39 an ounce, having earlier hit its lowest since June 4 at $1,320.75. US gold futures fell 0.2% to $1,326.1 an ounce.

Concerns over global trade and expectations that the US Federal Reserve would cut US interest rates sent spot prices to their highest since April 2018 last week at $1,348.08.

Bullion lost more than 1% on Monday after markets took heart from a deal between the US and Mexico to avert yet another tariff war. However, US secretary of state Mike Pompeo warned on Monday that the US could still slap tariffs on Mexico if not enough progress is made on its commitment to stem illegal immigration.

“The outlook for the world economy has not changed and that leads us to believe that the upside is still intact, but the [gold] market needs weaker stocks and a weaker dollar to see that through,” Saxo Bank commodity strategist Ole Hansen said.

“Right now, stocks are not weakening and that’s creating profit-taking,” he said. “The continued recovery in stocks is leading to recent established longs [in gold] being closed.”

European shares rose after the latest trade news, though US President Donald Trump said he was ready to impose another round of tariffs on Chinese imports if he cannot make progress in trade talks at a G20 summit later this month.

Gold also held above key technical levels as rising expectations for a US rate cut kept the dollar pegged near a two-and-a-half-month low against a basket of major currencies.

“We remain cautiously constructive on gold despite Monday’s decline as we have to suspect that the trend of a lower dollar and depressed global interest rates will continue to stay in place for some time,” INTL FCStone said in a note.

Among other precious metals, silver rose 0.2% to $14.69 an ounce, while platinum was up 0.3% to $804.46 an ounce. Palladium edged 0.1% higher to $1,382.65 an ounce after hitting a more than one-month high of $1,393.53 in the previous session. 

Reuters