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Gold prices fall as dollar gains vs yuan in escalating trade war

Reuters  |  BENGALURU 

By Karen Rodrigues

BENGALURU (Reuters) - Gold prices fell on Wednesday as the dollar firmed against the yuan after the threatened to impose additional tariffs on Chinese goods, escalating trade tensions between the world's two largest economies.

The said on Tuesday it would slap 10 percent tariffs on an extra $200 billion worth of goods imported from

The comes after imposed 25 percent tariffs on $34 billion of Chinese imports last week. responded immediately with matching tariffs on the same value of U.S. goods exported to

"I think the bad (for gold) in regards to geo-political risk is that the trade issue is already priced in," said Cameron Alexander, an with Thomson Reuters-owned metals consultancy GFMS.

Spot gold fell 0.3 percent at $1,250.90 an ounce at 0315 GMT. In the previous session, bullion hit a one-week low at $1,246.81 an ounce.

U.S. gold futures for August delivery were 0.3 percent lower at $1,251.90 an ounce.

The offshore Chinese yuan fell as low as 6.6918 per dollar, down more than 0.5 percent from late U.S. levels and edging near its 11-month low of 6.7344 touched on July 3.

A firmer greenback makes bullion expensive for holders of other currencies as the commodity is priced in dollars.

"When trade war risk escalates investors run for cover... I always have gold on as a hedge but its been more challenging to have this view when the U.S. dollar is attracting haven flows," said Stephen Innes, at

"For gold, support looks to be holding well around $1,250 but my fear is the USD could break higher and this is the biggest risk I see for gold."

Spot gold may break a support at $1,247 per ounce and fall more towards the next support at $1,237 as it has completed a bounce from the July 3 low of $1,237.32, said.

Meanwhile, holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, fell 0.22 percent to 799.02 tonnes on Tuesday.

Among other precious metals, silver fell 0.6 percent at $15.95 an ounce and palladium was 0.1 percent lower at $940.40.

shed 0.7 percent at $836.70 per ounce.

The market is expected to see its fourth consecutive surplus in 2018, led by a fall in demand in the automotive sector, yet supply is expected to drop and possibly support prices, said on Tuesday.

(Reporting by in Bengaluru; editing by and Eric Meijer)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, July 11 2018. 09:27 IST