Gold slips as investors favour the safety offered by the dollar

Bengaluru — Gold prices fell on Tuesday as investors sought safety in the US dollar amid concern of slowing global trade after the US imposed a new round of tariffs on Chinese imports.

US President Donald Trump on Monday imposed 10% tariffs on about $200bn worth of Chinese imports and warned of more tariffs if China retaliated.

Spot gold fell 0.2% at $1,198/oz at 3.09am GMT, after rising 0.6% in the previous session.

US gold futures were down 0.2% at $1,203.90/oz.

“Gold is facing a couple of headwinds.… The impending rate hike by the Fed is weighing and obviously the escalation of trade conflict is pushing investors back in to the US dollar,” ANZ analyst Daniel Hynes said.

“This [trade dispute] has not helped gold prices at all. It is likely to be a pretty tough environment for gold in the next couple of weeks as it battles these two fronts.”

Although gold is presumed to be a safe-haven asset, the months-long trade rift between Washington and Beijing has prompted investors to buy US dollars in the belief that the US has less to lose from the dispute.

Gold prices have declined by more than 12% from April amid the intensifying trade dispute between the US and China, the world’s top two economies, and as rising US interest rates diminish demand for non-interest bearing bullion.

Bond traders are increasing bets the Federal Reserve will raise US short-term interest rates into 2019 as the jobs market tightens and with inflation seen climbing above its 2% goal.