Metals Stocks: Gold holds ground at 5-week high as investors eye U.S., China trade tensions

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Gold futures headed higher on Monday, holding ground at their highest levels in five weeks, finding some support as the dollar declined, but a rebound in U.S. stocks on the back of easing trade tensions between the U.S. and China kept a cap on the metal’s gains.

April gold

GCJ8, +0.43%

 tacked on $5.20, or 0.4%, to $1,355.10 an ounce after tapping lows under $1,340. Prices were poised to mark their highest finish since Feb. 16, according to FactSet data. Silver also moved higher, with the May contract

SIK8, +1.25%

up 1.1% to $16.76 an ounce.

“China’s push-back on proposed U.S. tariffs worried the market and hurt the dollar as traders’ concerns about China’s continued support of the U.S. Treasury market came into focus,” said Peter Hug, global trading director at Kitco Metals. “Trade fears with China have impacted not only the dollar but equity markets, which tested their February lows” last week.

On Friday, China had fired back at the Trump administration’s move to add tariffs on at least $50 billion worth of goods. China’s commerce ministry on Friday said it would impose tariffs on $3 billion in U.S. goods, with officials accusing the U.S. of violating global trade rules.

President Donald Trump’s replacement of H.R. McMaster with John Bolton, as national security adviser has also “worried the market in respect to North Korea, as Bolton is considered a more aggressive war hawk,” he said. “There was enough turmoil to force a short squeeze in the metals.”

Against that backdrop, the dollar index remained under pressure Monday. The U.S. Dollar Index

DXY, -0.40%

fell 0.4% after logging a weekly loss of 0.9%. Gold and the dollar typically move inversely, as moves in the U.S. unit can influence the attractiveness of commodities to holders of other currencies.

Risk-on sentiment, however, was restored for now by reports that U.S. and Chinese officials are conducting behind-the-scenes talks to avert a global trade war. Gains in U.S. stocks served to limit gold’s rise.

Gold had notched a weekly gain of almost 3% last week on the threat of a looming trade war between the U.S. and China. The metal had also climbed amid weakness for dollar in the wake of the Federal Reserve’s hints at a less-aggressive monetary policy this year than some market participants had been factoring in.

But global investors seemed to be taking some cheer in reports that China and the U.S. have been holding discussions in a bid to help stave off a trade war.

“Progress in negotiations would be bullish for the dollar and bearish for gold but if things deteriorate instead, we could see further equity and dollar weakness and more upside for gold,” said Edward Meir, independent commodity consultant at INTL FCStone, in a recent note.

In other metals trading, May copper

HGK8, -0.07%

 fell 0.1% to $2.989 a pound. July platinum

PLJ8, +0.85%

 rose 0.8% to $961.90 an ounce. June palladium

PAM8, +0.62%

 rose 0.4% to $975.35 an ounce.

Among exchange-traded funds, the iShares Silver Trust

SLV, +1.38%

 was up 1.4%, while the SPDR Gold Shares

GLD, +0.63%

 added 0.7% and the VanEck Vectors Gold Miners ETF

GDX, +0.97%

 was up 1.2%.

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