‘Oversold’ gold trims its losses as first trade war salvo is fired

Bengaluru — Gold prices narrowed losses on Friday as US tariffs on Chinese imports weighed on the greenback, stoking fears of a full-blown trade war between the two leading economies.

China has implemented additional tariffs on some import products from the US immediately after US tariffs on $34bn in Chinese imports took effect, state media reported.

“If the trade war escalates and then China could sell US treasuries and buy gold. This would be a big event,” said Helen Lau, analyst, Argonaut Securities.

Spot gold was 0.1% lower at $1,256.54 an ounce by 7.02am GMT, having dropped to $1,252.15 earlier in the session.

Bullion was, however, headed for its first weekly gain in four.

US gold futures for August delivery slipped 0.1% to $1,257.50 an ounce.

The dollar eased against its peers on Friday ahead of the key US jobs report later in the day, and investor caution prevailed in global markets with focus turning to retaliatory measures China could employ.

China has no choice but to fight back against US bullying on trade, the country’s Commerce Ministry said on Friday.

“Traders are extremely cautious when it comes to gold. The intraday price action has a bullish set-up and shows that the price has potential to test the level of $1,280 in the coming days if the dollar weakness continues,” ThinkMarkets chief market analyst Naeem Aslam said.

Meanwhile, US central bankers discussed whether recession lurked around the corner and expressed concern that global trade tension could hit an economy that by most measures looked strong, minutes of the Federal Reserve’s last policy meeting on June 12-13 showed on Thursday.

The minutes described a meeting in which the Fed raised interest rates for the second time this year. It also suggested policy makers might soon signal the central bank’s rate-hiking cycle was advanced enough that policy was no longer boosting or constraining the economy.

“I take the view the Fed will take a modestly dovish line, while trade tariff uncertainties persist. Gold is oversold, so I expect it to rally somewhat while interest rate expectations soften, perhaps to one more instead of two quarter point increases this year,” said Alasdair Macleod, head of research with Toronto-based Goldmoney.

Among other precious metals, silver climbed 0.5% to $16.06 an ounce.

Palladium slipped 0.2% to $945.97 an ounce, while platinum gained 0.3% to $842.70.

All three metals were headed for their fourth straight weekly decline.

Reuters