Gold treads water as investors wonder where trade war is heading

Bengaluru — Gold prices were largely steady on Tuesday, retreating from an over six-year peak hit in the previous session, as US President Donald Trump signalled a possible reconciliation with China, calming worries about an escalation in their trade war.

Spot gold was up 0.1% to $1,528.10 an ounce, as of 3.47am GMT.

Gold prices on Monday surged to their highest in more than six years, surpassing the $1,550 mark in early trade, before paring gains after Washington and Beijing indicated a possible thaw in their trade spat.

The nonyielding bullion is often seen as a safer investment during times of political and financial uncertainty.

US gold futures were up 0.1% to $1,538 an ounce.

“Prices are steady because of the conciliatory tone both China and Trump sounded yesterday; the market started to hope that there is some deal coming out of the trade dispute,” said Helen Lau, an analyst at Argonaut Securities.

Hopes for monetary policy easing by central banks across the globe provided some support for the bullion, Lau said.

On Monday, US President Donald Trump flagged the possibility of a trade deal with China, and said he believed Beijing was sincere in its desire to reach an agreement. And Chinese vice-premier Liu He, who has been leading the talks with Washington, said China opposed any escalation in trade tensions.

Global markets had been roiled at the start of the week by new tariffs from the world’s two largest economies.

However, underscoring the possibility of further sudden U-turns and keeping gold from diving further, on Sunday the White House had said Trump regretted not raising the tariffs on China even more.

“More cynical heads are clearly ruling the gold market at the moment, and are refusing to listen to the short-term noise from the White House,” OANDA analyst Jeffrey Halley wrote in a note.

On the technical side, spot gold may peak in a range of $1,546-$1,568 an ounce, as suggested by its wave pattern and a projection analysis, according to Reuters technical analyst Wang Tao.

On the back of widespread risk-on sentiment, the benchmark 10-year US Treasury yield pulled back from a three-year low, which it reached on Monday. Higher bond yields increase the opportunity cost of holding bullion and support the dollar.

The dollar index, which measures the greenback’s value against a basket of six major currencies, rose about 0.5% overnight.

The markets are also fully priced for a quarter-point cut by the US Federal Reserve in rates in September, and over 100 basis points of easing by the end of 2019.

Elsewhere, silver was flat at $17.64 an ounce, and platinum was unchanged at $855. Palladium fell 0.2% to $1,470.20 an ounce.

Reuters