Gold edges up as US-China face-off boosts its safe-haven appeal
London — Gold prices edged higher on Tuesday after China and the US threatened to impose fresh tariffs on each other, boosting the precious metal’s safe-haven appeal.
US President Donald Trump threatened to impose a 10% tariff on $200bn of Chinese goods and Beijing warned it would retaliate, in a rapid escalation of the trade conflict between the world’s two biggest economies.
The move raised concerns about the prospects for global growth amid a trade war and triggered a sell-off in equities while lifting the yen and the dollar index. Gold prices can gain during times of financial and political uncertainty as the metal is seen as a safe place to park assets, alongside the yen.
"Gold is up slightly despite a higher dollar and that suggests that there is some safe-haven demand going into gold prices on the back of the trade dispute," said Capital Economics commodities economist Simona Gambarini.
Spot gold was up 0.1% at $1,279.38 an ounce by 10.42am GMT while US gold futures for August delivery were 0.1% higher at $1,281.70 an ounce. But rising interest rates in the US this year limited scope for upside in the precious metal, Gambarini said. Higher US rates tend to boost the dollar and weigh on gold, in which it is priced.
"We still think that the US Fed tightening and a strong dollar will prevent the gold price from rallying much further. We don’t expect a fall but we don’t expect it to rally either," she said.
The US economy "appears to be in a pretty good place" that should let the Fed continue its steady programme of raising interest rates, another Fed official said on Monday.
Meanwhile, in other precious metals, silver was down 0.2% at $16.36 an ounce, after earlier hitting the lowest since June 1 at $16.32.
Hedge funds and money managers raised their net long positions in Comex silver contracts to its strongest in six-and-a-half months, by 35,882 contracts to 40,177 contracts, data showed on Friday.
Platinum fell 0.3% to $878.50 an ounce, having earlier touched its lowest since mid-December at $873. Palladium was down 0.8% at $981.60 an ounce, after marking its lowest since May 30 at $975.15 overnight.