Gold prices slip back after a three-session climb

May 8, 2019

New York (May 8)  Gold futures edged lower on Wednesday following three session gains in a row, even as jitters around China-U.S. trade negotiations continued to nag markets perceived as riskier.

Prices for the precious metal traded higher initially Wednesday and are up week to date, as global stock markets have generally sold off so far this week, though U.S. benchmark stock indexes flirted with gains Wednesday.

“Given the corresponding sell-off in stock markets ... gold’s positive response is almost entirely due to a rise in risk aversion, owing mainly to renewed concerns over U.S.-China trade spat,” said Fawad Razaqzada, technical analyst at “The markets could be mostly in holding patterns ahead of the high stakes trade negotiations in Washington, D.C., on Thursday.”

“This week’s trade talks could therefore prove binary for gold and global sentiment in general,” he said in a daily note. “So, with that in mind, we don’t have too strong a view on the short-term direction of gold prices.”

Gold for June delivery GCM9, -0.30%  was down 20 cents, or 0.02%, at $1,285.40 an ounce after tapping a high of $1,292.80. It still trades about 0.3% higher for the week so far.

Silver for July delivery SIN9, -0.44% was down 2.6 cents, or 0.2%, at $14.90 an ounce.

Among ETFs, SPDR Gold Shares GLD, -0.27%  was up less than 0.1%, while the iShares Silver Trust SLV, -0.43%  lost 0.2%. The VanEck Vectors Gold Miners ETF GDX, -1.35%  rose 0.12%.

 Stocks declined sharply again on Tuesday, but eked out slight gains Wednesday, with attention still fixed on trade talks.

U.S. Trade Representative Robert Lighthizer said earlier this week that the Trump administration will increase tariffs on $200 billion in Chinese goods early Friday absent more agreement on outstanding matters. The prospect of higher tariffs had been first raised on Sunday by President Donald Trump, who said China backtracked, rattling investors who had anticipated that better progress toward a near-term resolution was at hand. Chinese Vice Premier Liu He will visit the U.S. Thursday to participate in the trade talks.

“Downside risks to growth from higher tariffs and the potential for equity weakness and lower yields should support gold. But potential upside to the dollar would likely act as a headwind to gold,” UBS analysts said in a research note, adding that Chinese demand for physical gold is lower right now.

The dollar, as measured by the ICE U.S. Dollar Index DXY, +0.07% was down less than 0.1% at 97.571.

Gold’s gains have been subdued, analysts note, as it competes with bonds TMUBMUSD10Y, +0.91% and the yen for haven flows, and in part as the dollar has held up relatively well against most currencies. A richer dollar can erode demand for gold priced in the currency by investors using other monetary units. Gold came under pressure last week and the dollar gained when the Federal Reserve tossed cold water on expectations an interest-rate cut could materialize later this year.

Rounding out metals trading, July copper HGN9, -0.56% fell 0.4% to $2.774 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, -1.00% fell 0.6% to $868.20 an ounce, while June palladium PAM9, -1.29%  shed 0.9% to $1,312 an ounce.


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