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Gold tops $1,300 for highest finish in a month on trade tensions

MarketWatch logo MarketWatch 5/13/2019 Myra P. Saefong

Gold futures climbed above $1,300 an ounce Monday to post their highest finish in roughly a month as U.S. benchmark stock indexes suffered steep declines with U.S.-China trade talks at an apparent stalemate.

“Uncertainty over the real impact on [the] U.S. economy and Chinese economy is driving gold prices higher,” Chintan Karnani, chief market analyst at Insignia Consultants, told MarketWatch.

“Traders and investors were neutral in gold on the weekend on the belief that a trade deal between U.S.-China would be reached. China announcing counter-tariff[s] acted as fodder [for a] gold price rise,” he said. “But spot gold needs to trade over $1,300 till tomorrow to attract new investors and new traders alike.”

Gold for June delivery added $14.40, or 1.1%, to settle at $1,301.80 an ounce after earlier trading as low as $1,282.40. That was the first settlement above $1,300 and highest most-active contract finish since April 10, according to FactSet data. Last week, prices based on the most-active contract climbed 0.5%.

The SPDR Gold Shares ETF (GLD) rose 1.1%.

Gold futures had settled higher for a second straight session on Friday as the Trump administration raised the import taxes on select Chinese goods from 10% to 25%. The administration claimed its Chinese counterparts reneged on commitments made in earlier talks.

Stocks on Friday had dropped initially on the trade developments before staging a late-session recovery and in Monday dealings, U.S. stocks traded broadly lower after China said it would raise tariffs on roughly $60 billion worth of U.S. imports to as high as 25%.

The dollar, as measured by the ICE U.S. Dollar Index (DXY) traded little changed as gold futures settled. Currency investors were increasingly favoring havens, including the Japanese yen, over the dollar.

Related video: Gold finding support from trade tensions (provided by CNBC)

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“Markets will likely be left in limbo for the coming weeks. Positive risk sentiment that had built in the early months of 2019 is now questionable,” said Richard Perry, market analyst at Hantec Markets. “Safe havens have benefited from all of this. Treasury yields have fallen, whilst the yen and Swissy have been the main winners in the forex space. The dollar had initially slipped on the shock, however, in the past couple of sessions has begun to build support again.”

It is relative dollar strength that has limited gold’s advance, say analysts, as a richer buck makes the metal less attractive to investors using other currencies and vice versa.

However, the overall trend for gold is “bullish” as long as the precious metal trades over the $1,292-$1,294 zone, said Karnani.

July silver trimmed earlier, deeper losses, to post a fall of 1.3 cents, or about 0.1%, at $14.777 an ounce, with the commodity, considered a precious and industrial metal, registering a weekly loss of 1.3% through Friday. July platinum fell $10.70, or 1.2%, to $854.90 an ounce; it suffered a weekly loss of 1.1%. June palladium lost $33.90, or 2.5%, at $1,316.80 an ounce.

July copper fell 5.6 cents, or 2%, to $2.719 a pound, after a weekly decline of 1.6%. Escalating U.S.-China trade tensions continued to raise concerns over a potential slowdown in demand for the industrial metal.

Related:Copper may soon be a ‘no-brainer’ buy as supplies tighten

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