The prices of gold on Monday retreated, erasing the previous session’s slim gains, as the fading concern over potential escalation in the trade stand-off between China and the US sparked a recovery in cyclical assets such as stocks at bullion’s expense.
Reuter reports that gold rose to 0.5% on Friday as the simmering worry over trade friction and softer-than-expected US payrolls data for March knocked equities and the dollar lower. However, it has struggled to maintain those gains.
Spot gold was down 0.3% at $1,338.45/oz by 9.50am GMT, while US gold futures for June delivery fell by $4.10 to $1,332.00.
“Holdings of physically backed gold products have been creeping up slowly, but not to the extent that you’d expect if a trade war was on the verge of breaking loose,” Julius Baer analyst Carsten Menke said.
“This is reflected in the gold market overall at this point in time. In the end, everybody knows a trade war will only bring losers and no winners, and this is what will eventually prevail when they sit together and negotiate the issues.”
Global equities rose and the dollar steadied on Monday as the US government played down fears of a trade war with China.
US President Donald Trump predicted on Sunday that China would take down its trade barriers, expressing optimism despite escalating tensions between the nations. Late on Thursday, Trump threatened to slap $100bn more in tariffs on Chinese imports, while Beijing said it was fully prepared to respond with a “fierce counter strike”.
Hedge funds and money managers cut their net long position in Comex gold in the week to April 3 and boosted their net short position in silver to another record, US Commodity Futures Trading Commission data showed on Friday.
Silver was flat at $16.35/oz.
Platinum gained 0.4% to $916.24.
Palladium, which as a component in autocatalysts is the most industrial of the major precious metals, was up 1.9% at $918/oz, in line with a bounce in other cyclical assets.
The metal had fallen for the past 11 sessions, hitting its lowest since mid-August at $895.47 on Friday. It is now down more than a fifth from the record high reached in January.
“The near 20% correction in palladium prices signals a possible bear market,” ScotiaMocatta said in a monthly note.
The correction is not surprising given the sharp price gains of recent years, it said, but added: “Palladium’s strong fundamentals remain in place, so we would expect dip-buying before too long.”