Gold declines as Trump’s China tariff threat rattles markets, lifts the yen

May 6, 2019

New York (May 6)  Gold prices move lower on Monday, with the precious metal failing to garner support as investors sought shelter in the U.S. dollar and Japanese yen from tumbling equities after U.S. President Donald Trump upended perceived progress on trade talks by threatening to raise tariffs on Chinese goods this week.

Gold has pulled back “with sharp market declines that are reacting to [the] U.S.-China tariff negotiations sudden bump in the road,” said George Gero, managing director at RBC Wealth Management. “Tariff threats worry investors as metals are in line to suffer and anti-inflationary aspects of retaliations and higher costs for producers affect almost all products.”

“Brexit [is] still unresolved and for now, havens are dollars, yen, and cash,” he said in an email update.

Gold for June delivery GCM9, +0.08%  edged down by $1.80, or 0.1%, to $1,279.50 an ounce, after the contract rose 0.7% to settle at $1,281.30 an ounce on Friday. The front-month contract pared last week’s loss to 0.6%, according to FactSet data.

July silver SIN9, -0.55%  fared less well, dipping 11.8 cents, or 0.8%, to $14.86 an ounce, after losing 0.7% last week.

Investors appeared to be leaning toward haven assets such as the dollar and the Japanese yen USDJPY, -0.25% which gained ground against the greenback, after a pair of tweets from Trump on Sunday indicated impatience with the progress of China-U.S. trade talks. Trump said he would increase tariffs on $200 billion of Chinese goods by Friday to 25% from 10%.

The dollar, as measured by the ICE U.S. Dollar Index DXY, +0.08% was up 0.1% at 97.618, but gains were capped as the yen USDJPY, -0.25% touched an eight-week high against the dollar.

Benchmark stock indexes were sharply lower on Wall Street, with Dow Jones Industrial Average futures YMM9, -0.95%  down 313 points. Oil prices CLM9, -0.15%  were also under pressure. China stocks SHCOMP, -5.58%  slid 5.6%, suffering the worst one-day loss since 2016.

July copper HGN9, +0.46%  fell 0.1% to $2.816 a pound. If a trade deal is indeed on the ropes, that could also mean difficulties for China’s economy, and the country accounts for a bulk of demand for the industrial metal.

Elsewhere, July platinum PLN9, +0.35% fell 0.7% to $868.40 an ounce, while June palladium PAM9, -2.29%  dropped 2% to $1,330.90 an ounce.

Among exchange-traded funds, SPDR Gold Shares GLD, +0.27%  was down less th an 0.1%, while the iShares Silver Trust SLV, -0.05%  shed 0.4%.


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