Gold prices inched up on Wednesday to their highest in a week as the dollar weakened and equities dropped after US President Donald Trump said he would push ahead with punitive tariffs on imports, rekindling fears of a potential trade war.
Spot gold rose 0.1% to $1,335.02 per ounce by 8.44am, having hit $1,340.42 an ounce earlier in the session, its highest since 26 February. US gold futures for April delivery rose 0.1% to $1,336.30 per ounce.
“Volatility in risk assets, and concerns around the implications of Trump’s tariff rhetoric has helped propel gold higher,” said Jordan Eliseo, chief economist at gold trader ABC Bullion.
Global stocks and the dollar fell after a key advocate for free trade and Trump’s top economic adviser, Gary Cohn, resigned after the president said he was sticking with plans to impose tariffs on imports, which some critics have dubbed the first shot in a global trade war.
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Last Thursday, Trump had said a plan for tariffs of 25% on steel imports and 10% on aluminium products would be formally announced this week.
Traders fear the departure of Cohn, a former Wall Street banker, would embolden protectionist forces in the US administration as Trump tries to impose hefty tariffs.
“Prices will remain firmly supported … from Cohn’s departure as the tariff gambit hits the market again with blunt force,” said Stephen Innes, APAC trading head at OANDA.
Cohn’s resignation also offsets pressure from recovering risk appetites that followed Tuesday’s news of North and South Korea holding their first summit in over a decade, and that came after the South said the North expressed willingness to discuss denuclearization with the United States.
Gold is used as an alternative investment during times of political and financial uncertainty, and a weaker dollar makes the metal cheaper for holders of other currencies.
Spot gold may fall to $1,327 per ounce following its failure to break above $1,342, according to Reuters technical analyst Wang Tao.
Meanwhile, Asian gold-backed exchange-traded funds (ETFs) added more tonnes in February than North America or Europe, reversing Asia’s 2017 trend of having more flows out, the World Gold Council said on Tuesday
In other precious metals, silver fell 0.1% to $16.71 per ounce, after hitting its highest in more than two weeks. Platinum dipped 0.2% to $966.50 per ounce. Palladium declined 0.4% to $982.00 per ounce
Report courtesy Reuters
Frontpage December 17, 2019