Gold climbs after U.S.-China trade picture deteriorates

By Renita D. Young and Pratima Desai

NEW YORK/LONDON, Aug 31 – Gold ticked higher on Friday despite a stronger dollar, as investors worried about an escalation in the U.S.-China trade dispute after fresh threats by U.S. President Donald Trump, though bullion was still headed for its fifth straight monthly decline.

Spot gold gained 0.1 percent at $1,200.70 per ounce by 1:34 p.m. EDT (1734 GMT) for a rise of about 4 percent from the 19-month low of $1,159.96 hit on Aug. 16. U.S. gold futures for December delivery settled up $1.70, or 0.1 percent, at $1,206.70 per ounce.

Gold prices are down nearly 2 percent in August, shedding more than 7 percent this year.

“Gold is trading in a supportive environment due to increased tariffs imposed on China, said David Meger, director of metals trading at High Ridge Futures. “That is in contrast to a firmer dollar today.”

Trump is prepared to ramp up a trade war with China and has told aides he was ready to impose tariffs on $200 billion more in Chinese, Bloomberg reported on Thursday.

“Trump’s plans have had a significant impact on sentiment and the slightly weaker dollar is supporting gold,” said Peter Fertig, analyst at Quantitative Commodity Research, adding that the emerging-market currency crisis was also supporting gold.

A weaker U.S. currency makes dollar-priced gold cheaper for holders of other currencies and would potentially boost demand. But safe-haven demand for gold overshadowed its relationship with the greenback on Friday, traders said.

However, the prospect of higher U.S. interest rates next month and again before the end of the year is a negative.

Higher U.S. rates raise the opportunity cost of holding gold, which yields no interest and costs money to store and insure. This is why many investors have sold their gold holdings, shown in exchange-traded funds (ETFs).

“The ongoing outflows from ETFs, record-high speculative shorts and upbeat U.S. economic data are still the major headwinds for gold and signify the recovery might be short- lived,” said Religare Securities analyst Sugandha Sachdeva.

Silver fell 0.4 percent to $14.48 an ounce, down close to 2 percent for the week and more than 6 percent for the month, its lowest monthly close since November 2016.

Palladium rose 1.8 percent to $982.60 per ounce, ending the week up and closing August up more than 5 percent, its highest monthly close since January 2017.

Platinum shed 0.6 percent to $784.20 per ounce, and was headed for a monthly close of more than 5 percent lower. (Reporting by Renita D. Young in New York and Pratima Desai in London; Additional reporting by Nallur Sethuraman in Bengaluru and Maytaal Angel in London; editing by Dale Hudson, David Goodman and Richard Chang)

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