Gold is buoyed by the deteriorating US-China trade picture

London — Gold prices rose on Friday due to a lower dollar and jitters about an escalation in the US-China trade dispute after fresh threats by US President Donald Trump, although bullion is still heading for its fifth straight monthly decline.

Spot gold was up 0.6% at $1,206.19 an ounce at 9.26am GMT, a gain of 4% from the 19-month low of $1,159.96 hit on August 16. US gold futures were up 0.7% at $1,212.80 an ounce. Gold prices are down 1.3% so far in August. Losses total more than 7% so far this year.

Trump is prepared to ramp up a trade war with China and has told aides he is ready to impose tariffs on $200bn more in Chinese imports as soon as a public comment period on the plan ends next week, Bloomberg reported on Thursday.

“Trump’s plans have had a significant impact on sentiment and the slightly weaker dollar is supporting gold,” said Peter Fertig, analyst at Quantitative Commodity Research, adding that the emerging-market currency crisis was also helping gold.

A lower US currency makes dollar-priced gold cheaper for holders of other currencies and would potentially boost demand. This is a relationship used by funds to generate buy and sell signals.

However, the prospect of higher US interest rates next month, and again before the end of the year, is a negative. The US Federal Reserve next meets on September 25 and 26 and twice more in November and December. Higher US rates raise the opportunity cost of holding gold, which yields no interest and costs money to store and insure. This is why many investors have sold their gold holdings, as can be seen in exchange-traded funds (ETFs).

The holdings of SPDR Gold Trust, the world’s largest gold-backed ETF at 24.36-million ounces, are down 13% since late April. “The ongoing outflows from ETFs, record-high speculative shorts and upbeat US economic data are still the major headwinds for gold and signify the recovery might be short-lived,” Religare Securities analyst Sugandha Sachdeva said.

Silver was up 0.9% at $14.67 an ounce, palladium was up 1.3% at $977.60 an ounce and platinum rose 0.8% to $794.99 an ounce.

Reuters