Picture: REUTERS
Picture: REUTERS

London — Gold prices fell on Tuesday as the dollar firmed after China said it would retaliate against a new round of US tariffs on its goods, intensifying tensions between the world’s two largest economies.

US President Donald Trump said he was imposing 10% tariffs on about $200bn worth of imports from China, and threatened duties on about $267bn more if China retaliated against the US action.

Although gold is presumed to be a safe-haven asset, the months-long trade rift between Washington and Beijing has prompted investors to buy US dollars in the belief that the US has less to lose from the dispute.

Spot gold fell 0.2% to $1,198.78/oz by 10.30am GMT, after rising 0.6% in the previous session.

US gold futures were down 0.2% at $1,203.10/oz.

"One of the big problems that gold is facing is that it is trying to battle a mountain of pessimism," ETF Securities analyst Nitesh Shah said.

"The speculative positioning in gold is down to its lowest levels since 2001 … gold is not behaving like the haven that it is supposed to be."

Gold prices have declined more than 12% from April amid the intensifying trade dispute between the US and China, and as rising US interest rates diminish demand for non-interest-bearing bullion.

Investors were eyeing a meeting by the US Federal Reserve next week at which interest rates are widely expected to be raised, said ActivTrades chief analyst Carlo Alberto De Casa.

"Any comments about the 2019 monetary policy could be a new significant driver for the precious metal," he said.

The dollar index, which measures the greenback against a basket of currencies, inched up 0.1% to 94.586.

Investors trimmed their net short position in Comex gold and silver in the week to September 11, US data showed.

"Since the priced-in forecast for a December rate hike to follow the one this month has firmed despite soft US data, this might ultimately lead the dollar higher and gold lower," said Ilya Spivak, a currency strategist for Dailyfx.

Spot silver fell 0.3% to $14.19/oz.

Platinum rose 0.8% to $802.90, while palladium was up 0.5% at $989/oz.

Reuters