Gold Dips as Dollar Surges on China, U.S. Consumer Data

May 18, 2019

New York (May 18)  Dollar bulls seem to making more of the back and forth on the U.S.-China trade talks than gold bugs.

Bullion and futures of gold hit two-week lows on Friday, breaking decisively from the bullish $1,300 levels, after China’s state-run media expressed impatience over the progress of trade negotiations with Washington. The dollar hit two-week highs, bolstered also by a 15-year high in U.S. consumer sentiment.

Spot gold, reflective of trades in bullion, slid by $10.32, or 0.8%, to $1,276.34 per ounce by 2:15 PM ET (18:15 GMT).

Gold futures for June delivery, traded on the Comex division of the New York Mercantile Exchange, settled down $10.50, or 0.8%, at $1,275.70 per ounce.

Unlike many assets, gold is in a unique position in the U.S.-China trade war. A positive resolution on that means bullion could benefit from more jewelry and other bullion-related consumption in China. A negative outcome could bolster gold's standing as a safe-haven hedge against further weakening in Chinese growth.

Spot gold reached a one-month peak of $1,303.35 on Tuesday after China countered higher U.S. tariffs on its goods by announcing duty hikes of its own on American merchandise. June gold soared to a one-month high $1,304.20 the same day.

But in recent days, the dollar had caught up as a hedge in the trade war angst.

The dollar index, which measures the greenback against a basket of six currencies, rose by 0.1% to 97.79. It hit a two-week high of 97.84 with Friday's open.

Taoran Notes, a pro-government WeChat blog run by China's state-owned Economic Daily, said it was "meaningless" for Chinese officials to meet with their American counterparts when Washington wasn't showing any sincerity for the welfare of Chinese commerce in striking a trade deal.

The comments, coming just a day after the White House excluded Huawei and other Chinese companies from the U.S. market, are a turn in rhetoric for China, which had previously been patient and hopeful on a deal being reached.

Elsewhere in metals, palladium slumped after a four-day rally but still managed to hold on to its mantle as the world's costliest traded metal.

Spot palladium was down $19.70, or 1.5%, at $1,316.40 an ounce. The silvery-white metal, used for purifying gasoline emissions, traded above $1,600 at one point in early March. But it has lost about 20% since on concerns that it may have rallied too fast, too soon on talk of tight supply.

Trades in other Comex metals as of 2:15 PM ET (18:15 GMT):

Palladium futures down $17.20, or 1.3%, at $1,307.50 per ounce.

Platinum futures down $13.85, or 1.7%, at $819.75 per ounce.

Silver futures down 14 cents, or 1%, at $14.40 per ounce.

Copper futures down 1 cent, or 0.4%, at $2.75 per pound.

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