Gold. Picture: REUTERS
Gold. Picture: REUTERS

Bengaluru — Gold prices fell on Wednesday as the dollar firmed against the yuan after the US threatened to impose additional tariffs on Chinese goods, escalating trade tension between the world’s two largest economies.

The Trump administration said on Tuesday it would slap 10% tariffs on an extra $200bn worth of goods imported from China.

The news comes after Washington imposed 25% tariffs on $34bn of Chinese imports last week. Beijing responded immediately with matching tariffs on the same value of US goods exported to China.

"I think the bad news [for gold] in regards to geopolitical risk is that the trade issue is already priced in," said Cameron Alexander, an analyst with Thomson Reuters-owned metals consultancy GFMS.

Spot gold fell 0.3% at $1,250.90/oz at 3.15am GMT. In the previous session, bullion hit a one-week low at $1,246.81/oz.

US gold futures for August delivery were 0.3% lower at $1,251.90/oz.

The offshore Chinese yuan fell as low as 6.6918 to the dollar, down more than 0.5% from late US levels and edging near its 11-month low of 6.7344 touched on July 3. A firmer greenback makes bullion expensive for holders of other currencies as the commodity is priced in dollars.

"When trade war risk escalates investors run for cover.… I always have gold on as a hedge but it’s been more challenging to have this view when the US dollar is attracting haven flows," said Stephen Innes, Asian-Pacific trading head at Oanda.

"For gold, support looks to be holding well around $1,250, but my fear is the [dollar] could break higher and this is the biggest risk I see for gold."

Spot gold might break a support at $1,247/oz and fall more towards the next support at $1,237 as it had completed a bounce from the July 3 low of $1,237.32, Reuters technicals analyst Wang Tao said.

Meanwhile, holdings of the world’s largest gold-backed exchange-traded fund (ETF), SPDR Gold Shares, fell 0.22% to 799.02 tonnes on Tuesday.

Among other precious metals, silver fell 0.6% at $15.95/oz.

Palladium was 0.1% lower at $940.40 and platinum shed 0.7% to $836.70/oz. The platinum market is expected to see its fourth consecutive surplus in 2018, led by a fall in demand in the automotive sector, yet supply is expected to drop and possibly support prices, CPM Group said on Tuesday.