Gold rises as global markets retreat ahead of looming U.S.-China trade deadline

May 9, 2019

London (May 9)  Gold futures headed slightly higher Thursday morning as investors braced for intensifying Sino-U.S. trade conflicts, which could provide a lift to bullion amid markets stricken by international trade fears.

Gold for June delivery GCM9, +0.17%  gained $4,10, or 0.3%, at $1,285.40 an ounce, recovering some of its losses from the previous session. The precious metal is on pace to climb for four of the past five sessions, according to FactSet data, putting it on track for a weekly gain of about 0.3% based on last Friday’s settlement.

The U.S. is set to raise tariffs on some $200 billion in Chinese imports to 25% from 10% on Thursday at 12:01 a.m. Eastern Time, as the Trump administration attempts to ratchet up pressure on Beijing to strike a substantive trade agreement.

At a Wednesday rally with supporters in Florida, President Donald Trump said China “broke the deal.”

The Wall Street Journal reported that China has adopted hardball tactics, as it perceives signs of weakness in the U.S.’s negotiating position. On Wednesday, WSJ also reported that Beijing has threatened unspecified retaliation if the White House pushes through tariff increases, even as China’s trade envoy, including Vice Premier Liu He, is slated to commence fresh negotiations Thursday, highlighted by a dinner between Liu and U.S. trade negotiator Robert Lighthizer.

Gold has benefited somewhat against this backdrop of uncertainty.

However, commodity investors have expressed disappointment that the yellow metal hasn’t enjoyed a more decisive rally.

“Gold was unable to break the first resistance placed at $1,288, confirming that the times are not mature for another bullion rally yet,” wrote Carlo Alberto De Casa, chief analyst at ActivTrades.

Heightened conflicts with Iran, where the U.S. has deployed a military force as Tehran has threatened to abandon commitments under a 2015 nuclear agreement and signs of increased aggressions from North Korea, should push up prices of the asset that appreciates during global turmoil, market participants said.

Still, some gold bulls say the commodity may claw higher if trade talks deteriorate further and as the increased China import duties come into force:

“Having already breached the $1,290 level this week before moderating, Bullion may surge past that level once again, in the event that negotiations in Washington break down and higher US tariffs kick in,” wrote Han Tan, market analyst at FXTM, in a Thursday research note.

Read: Why gold’s a ‘bargain’ at less than $1,300 an ounce

Meanwhile, silver for July delivery SIN9, -0.38% fell 3 cents, or 0.2%, to $14.830 an ounce, with the commodity on track for a 1% weekly skid.

Among ETFs, SPDR Gold Shares GLD, -0.25%  were up 0.3% premarket, while VanEck Vectors Gold Miners ETF GDX, -1.11%  looked set to rise 0.5%. The iShares Silver Trust SLV, -0.64%  wasn’t actively traded ahead of the bell.


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