Gold Refinery gold shavings. Picture: AFP PHOTO / OZAN KOSE
Gold Refinery gold shavings. Picture: AFP PHOTO / OZAN KOSE

Bengaluru — Gold prices fell on Monday as an escalating trade conflict between Washington and Beijing weighed on the yuan, denting demand in the world's biggest consumer of the metal, China.

Spot gold was down 0.2% at $1,283.63 an ounce at 10.31am GMT. US gold futures slipped 0.3% to $1,284.20.

"Gold is trading a touch softer even though some of the outside market should be providing support. Bond yields are lower, stocks are lower and the dollar is also slightly down -- all gold-friendly developments," Saxo Bank commodity strategist Ole Hansen.

"We're seeing the negative impact from the yuan."

The yuan was set for its worst daily fall in nine months, hurt by trade concerns, making gold expensive for buyers in China. 

Trade tension has plagued investors in wider markets, with Washington increasing tariffs on $200bn of Chinese goods on Friday, raising the chances of a retaliation from Beijing.

The two biggest economies appeared to be deadlocked on Sunday as Washington demanded promises of concrete changes to Chinese law and Beijing said it would not swallow any "bitter fruit" that harmed its interests.

However, gold has been stuck in a $15 range over the past week despite weakness in global equity markets.

"Also, another market we don't watch often, bitcoin, seems to be on fire once again," Saxo Bank's Hansen said.

"We've been seeing a strong move higher in bitcoin over the past couple of weeks, which may also remove some demand for alternative assets such as gold."

Bitcoin hovered close to nine-month highs as the biggest cryptocurrency's 2019 rally gathered momentum.

Gold also faced a barrier at about $1,290, restricting buying from traders who follow technical charts, analysts said.

"Gold's performance has been rather disappointing to both bulls and bears alike," INTL FCStone analyst Edward Meir said in a note.

Signals are mixed for spot gold, stuck in a neutral range of $1,284-$1,291 an ounce, according to Reuters technical analyst Wang Tao.

On the investment side, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.9% on Friday.

Silver was down 0.6% at $14.66 an ounce while platinum eased by 0.4% to $857.66 and palladium dropped 1.6% to $1,335.80.

Palladium will narrow its deficit in 2019 compared with last year, while platinum's surplus is seen nearly doubling, said research group Metals Focus.

The World Platinum Investment Council, however, said that a surge in investment demand has reduced expectations of a large surplus in the platinum market in 2019. 

Reuters