Gold edges lower as trade tensions continue to weigh

By Zandi Shabalala

LONDON (Reuters) - Gold prices eased slightly on Monday as the dollar held near a one-week high on worries over an escalation in trade conflicts between the United States and its trading partners.

A firmer U.S. currency makes dollar-priced gold more expensive for holders of other currencies, potentially sapping demand. Safe-haven demand for gold has this year been overshadowed by the metal's relationship with the greenback.

U.S. President Donald Trump said on Saturday that there was no need to keep Canada in the North American Free Trade Agreement and warned Congress not to meddle with negotiations or he would terminate the trilateral trade pact, which also includes Mexico.

 

Meanwhile, Bloomberg News reported that Trump was prepared to ramp up a trade war with China and had told aides that he was ready to impose tariffs on $200 billion more in Chinese imports as soon as a public comment period on the plan ends on Thursday.

"For as long as the trade war fears that are helping dollar strength continue, gold is going to come under pressure," said ETF Securities commodity strategist Nitesh Shah.

Gold prices are down about 8 percent this year against a backdrop of rising U.S. interest rates, trade disputes and the Turkish currency crisis, with investors parking their money in the U.S. dollar.

Spot gold was down 0.1 percent at $1,199.56 an ounce at 1220 GMT, having touched an intra-day low of $1,195.36.

U.S. gold futures were flat at $1,206.70 an ounce.

The dollar index, which measures the greenback against a basket of currencies, was barely changed at 95.171.

If gold recovers to $1,210 an ounce there are good chances of seeing further rebounds to $1,230, said ActivTrades chief analyst Carlo Alberto De Casa. But a decline below $1,200 would see prices test $1,180 and to the following support placed at $1,160, he added.

There was some indication that the bearish sentiment in the market has started to shift slightly, with net short positions in COMEX gold contracts in the week to Aug. 28 showing a decline for the first time in more than a month.

U.S. economic data this week, including a manufacturing survey on Tuesday and an employment report on Friday, could influence gold's moves as investors look for clues on the pace of U.S. interest rate increases.

Meanwhile, liquidations continued in SPDR Gold, the world's largest gold-backed exchange-traded fund. Holdings have fallen by more than 13 percent since peaking in late April.

Spot silver was flat at $14.50 an ounce after touching its lowest in more than two weeks at $14.37.

Platinum was steady at $783 an ounce, while palladium was unchanged at $981 after hitting a 10-week high on Friday at $984.97.

(Additional reporting by Nallur Sethuraman in BENGALURU; Editing by Kirsten Donovan and David Goodman)