Gold fights for altitude as Trump’s China tariff threat unsettles markets

Gold prices turned slightly higher on Monday, with the precious metal giving up earlier losses, as investors reacted to a slump in equities after President Donald Trump upended perceived progress on trade talks by threatening to raise tariffs soon on China.

Gold has pulled back “with sharp market declines that are reacting to [the] U.S.-China tariff negotiations sudden bump in the road,” said George Gero, managing director at RBC Wealth Management. “Tariff threats worry investors as metals are in line to suffer and anti-inflationary aspects of retaliations and higher costs for producers affect almost all products.”

“Brexit [is] still unresolved and for now, havens are dollars, yen, and cash,” he said in an email update.

As gold prices turned higher, Gero said he was not surprised that the Comex gold contract was “catching up” with the session’s gains in gold exchange-traded funds and gold equities.

Gold for June delivery GCM9, +0.11%  moved up by $1.40, or 0.1%, to $1,282.70 an ounce after tapping a low of $1,278.10. The contract rose 0.7% to settle at $1,281.30 an ounce on Friday, paring last week’s loss to 0.6%, according to FactSet data.

Among ETFs, SPDR Gold Shares GLD, +0.29% was up 0.3%, while the iShares Silver Trust SLV, +0.11% added less than 0.1%. The VanEck Vectors Gold Miners ETF GDX, +0.64% added 0.6%.

July silver SIN9, -0.35% meanwhile, dipped 7.3 cents, or 0.5%, to $14.905 an ounce, after losing 0.7% last week.

Investors appeared to be leaning more toward haven assets such as the Japanese yen USDJPY, -0.23% which gained ground against the greenback, after a pair of tweets from Trump on Sunday indicated impatience with the progress of China-U.S. trade talks. Trump said he would increase tariffs on $200 billion of Chinese goods by Friday to 25% from 10%.

The dollar, as measured by the ICE U.S. Dollar Index DXY, +0.03% was trading nearly flat at 97.530, with moves limited by a rise in the yen USDJPY, -0.23% which touched an eight-week high against the dollar.

“The base case remains that a [U.S.-China trade] deal will get done, but we are seeing risk come off as markets pretty much had fully priced in a trade deal,” said Edward Moya, senior market analyst at OANDA. “Another round of escalation in trade tensions could put the dent back into risk appetite, but so far stock and currency markets have retraced pretty much 50% of the move.”

Benchmark stock indexes were lower on Wall Street, though off session lows, with Dow Jones Industrial Average YMM9, -0.85% down 205 points. Oil prices CLM9, +0.92% were also mostly under pressure. China stocks SHCOMP, -5.58% slid 5.6%, suffering the worst one-day loss since 2016.

July copper HGN9, +0.76% turned higher, tacking on 0.6% to $2.835 a pound. If a trade deal is indeed on the ropes, however, that could also mean difficulties for China’s economy, and the country accounts for a bulk of demand for the industrial metal.

Elsewhere, July platinum PLN9, +0.46% rose 0.5% to $878.80 an ounce, while June palladium PAM9, -2.33% dropped 2.3% to $1,327.80 an ounce.

MarketWatch

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Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya