Gold prices edge up on doubts of US-China trade resolution

Bengaluru — Gold prices edged up on Friday amid doubts that a highly anticipated meeting between the US and China would ease trade tensions, driving bullion to its best month in three years.

Spot gold was up 0.4% at $1,414.24 an ounce at 11.33am GMT. Gold has risen nearly 8.4% so far this month, on track for its biggest monthly percentage gain since June 2016.

The metal is also set to post its sixth consecutive weekly rise, having gained 1.1% so far this week. US gold futures climbed 0.4% to $1,417.40.

White House economic adviser, Larry Kudlow said US President Donald Trump had agreed no pre-conditions for his high-stakes meeting with China’s President Xi Jinping and is maintaining his threat to impose new tariffs on Chinese goods.

“Doubts about the success of the meeting between the two leaders have been weighing on risky assets; that is positive for gold,” said Quantitative Commodity Research analyst Peter Fertig.

The leaders of the G20 countries meet on Friday and Saturday in Osaka, Japan, with a meeting between Trump and Xi scheduled for Saturday.

The trade tensions weighed on equity markets, boosting the appeal of safe-haven bullion.

The dollar index declined 0.1% after coming close to a one-week high in the previous session, making bullion cheaper for buyers in other currencies.

“There have been signals from the recent Federal open market committee on rate cuts. Real yields on government bonds have been falling, which is positive for precious metals along with the weakening dollar. The outlook for gold looks positive from the fundamental side,” Fertig said.

Gold prices have gained more than $80 in the last two weeks, mainly on expectations that there will be at least a quarter percentage point rate reduction in July by the Fed.

“The sustained decline in rates is a key factor [for gold], particularly as the Fed shifts to a more dovish stance,” UBS analysts said in a note, raising their three-month gold price target to $1,430 from $1,380. “Uncertainty around growth and trade risks suggests more strategic positions are likely to be built.”

Meanwhile, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.3% to 795.80 tonnes on Thursday, from Wednesday. However, holdings have still gained more than 7% this month.

Silver edged down 0.2% to $15.22 an ounce, but was on track for its first monthly gain in five. Palladium fell 0.7% to $1,537.20 an ounce. However, the automotive-catalyst metal has risen more than 16% so far this month, its biggest monthly percentage gain since November 2016. Platinum was up 0.6% at $816.24.

Reuters