Gold slips to 1-week low as Mexico tariff reprieve boosts equities

June 11, 2019

New York (June 11) - Gold fell to a one-week low on Tuesday as the United States halted its plans to impose tariffs on Mexico, boosting appetite for riskier assets like equities at the expense of alternatives like bullion.

Spot gold was down 0.4% at $1,322.39 per ounce as of $1,322.39 GMT, having earlier hit its lowest since June 4 at $1,320.75. U.S. gold futures fell 0.2% to $1,326.1 an ounce.

Concerns over global trade and expectations the Federal Reserve would cut U.S. interest rates sent spot prices to their highest since April 2018 last week at $1,348.08.

Bullion lost more than 1% on Monday after markets took heart from a deal between the United States and Mexico to avert yet another tariff war.

However, U.S. Secretary of State Mike Pompeo warned on Monday the U.S. could still slap tariffs on Mexico if not enough progress was made on its commitment to stem illegal immigration.

“The outlook for the world economy has not changed and that leads us to believe that the upside is still intact, but the (gold) market needs weaker stocks and a weaker dollar to see that through,” Saxo Bank commodity strategist Ole Hansen said.

“Right now stocks are not weakening and that’s creating profit-taking,” he said. “The continued recovery in stocks is leading to recent established longs (in gold) being closed.”

European shares rose after the latest trade news, though U.S. President Donald Trump said he was ready to impose another round of tariffs on Chinese imports if he cannot make progress in trade talks at a Group of 20 summit later this month.

Gold also held above key technical levels as rising expectations for a U.S. rate cut kept the dollar pegged near a 2-1/2 month low against a basket of major currencies.

“We remain cautiously constructive on gold despite Monday’s decline as we have to suspect that the trend of a lower dollar and depressed global interest rates will continue to stay in place for some time,” INTL FCStone said in a note.

Among other precious metals, silver rose 0.2% to $14.69 per ounce, while platinum was up 0.3% to $804.46 an ounce.

Palladium edged 0.1% higher to $1,382.65 per ounce after hitting a more than one-month high of $1,393.53 in the previous session.


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