Gold falls as trade war fears boost dollar

Gold fell to its lowest in more than six months yesterday as the dollar held near a one-year high, propelled by mounting pressure from a US-driven trade dispute that has led investors to dump equities.

Global equities slipped to their lowest in almost three months, buffeted again after US President Donald Trump and White House economic adviser Larry Kudlow outlined plans to clamp down on Chinese acquisitions of sensitive American technologies.

The trade tensions pushed the dollar to test a one-year high against a currency basket.

A strong dollar makes dollar-priced gold costlier for non US investors and while falling equities, seen as risky assets, usually help safehaven gold, they have failed to do so this time. “There is some safe-haven demand going into gold but not as much as is going elsewhere, like the dollar or treasuries or safe-haven currencies like the franc,” said Capital Economics analyst Simona Gambarini.

Spot gold was flat at $1,250.80 an ounce at 1024 GMT. Earlier, it touched $1,248.21, its lowest since mid-December.

US gold futures for August delivery dropped 0.3 per cent at $1,252.70 an ounce.

Investors are positioning for a potentially fraught meeting of European Union leaders to discuss issues such as migration, Brexit and trade. They are also looking for indications on the survival prospects for the fractious new German coalition.

“Nowadays, there is no safe-haven appeal for gold, people are tracking other assets as safe havens,” said Hareesh V, head of commodity research, Geojit Financial Services.

In a nod to dollar bulls, Boston Federal Reserve President Eric Rosengren on Wednesday said the central bank should continue to raise interest rates gradually to lower the risk of a major policy error.