Gold is weaker as escalating trade tensions lift the dollar

Bengaluru — Gold fell on Monday, with prices dropping below the $1,200 technical level, as the dollar strengthened on worries over the potential for more tariffs between the US and China as part of their trade war.

Spot gold was down 0.2% at $1,199.56/oz at 2.55am GMT, while US gold futures were down 0.2% at $1,204.30/oz.

“Gold prices are down on the strong dollar, as the trade between the US and Canada has not been settled and [US President Donald] Trump is pushing for another round of tariffs on China. All this is bad news for gold,” said Ji Ming, chief analyst at Shandong Gold Group.

Trump has told his aides he is ready to impose tariffs on an additional $200bn worth of imports from China as soon as a public comment period on the plan ends on Thursday.

Trump said on Saturday there was no need to keep Canada in the North American Free Trade Agreement (Nafta) and warned Congress that he would terminate the trilateral trade pact altogether.

“If the tariffs are imposed this week, then gold might go down further to around $1,180 levels. But, that is a good range to get in as a lot of physical investors are interested in buying at these prices,” Ming said.

Spot gold targets $1,185/oz, as it has broken a support at $1,200 again, said Reuters technical analyst Wang Tao.

Gold prices have fallen about 8% so far in 2018 amid rising US interest rates, international trade disputes and the Turkish currency crisis, with investors parking their money in the US dollar.

The dollar index, which measures the greenback against a basket of currencies, was up 0.1% at 95.204.

“In the near term, we see gold trading in a narrow range of $1190/oz-$1210/oz, with move out of this range on either side would see further downside or upside risk,” said John Sharma, an economist at National Australia Bank.

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

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

Spot silver fell 0.2% to $14.47/oz, after earlier falling to its lowest in more than two weeks at $14.37.

Platinum rose 0.6% to $787.40/oz, while palladium was down 0.5% to $976.60, after hitting a 10-week high on Friday at $984.97.

Reuters