Gold futures slipped Monday from their highest finish in five weeks on Friday as stocks looked to roar back from their worst weekly performance in more than two years, tracking the latest developments in touchy China-U.S. trade relations.
April gold GCJ8, -0.13% fell $2, or 0.2%, at $1,347.90 an ounce. The settlement Friday at $1,349.90 marked its highest since Feb. 16, according to FactSet data. Silver also moved higher, with the May contract SIK8, +0.35% up 0.1% to $16.600 an ounce. The contract recorded a weekly rise of 1.9%.
Risk-on sentiment, to the detriment of gold demand, was restored for now by reports that U.S. and Chinese officials are conducting behind-the-scenes talks to avert a global trade war. Gold had notched a weekly gain of almost 3% last week as the threat of a looming trade war between the U.S. and China appeared to intensify as recently as Friday. What’s more, gold was pushed higher last week on weakness for the U.S. 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.
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. Those talks, led by U.S. Treasury Secretary Steven Mnuchin and Liu He, China’s vice premier for economic policy, are aimed at providing better access to Chinese markets for U.S. companies. Mnuchin told Fox News on Sunday that he was “cautiously hopeful” an agreement can be reached with China. In reaction, stock futures trading indicated a sharply higher open for U.S. equities.
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.
Bottom line: trade issues aren’t going away any time soon, said Richard Perry, market analyst with Hantec Markets.
“It is estimated that U.S. tariffs would negatively impact the Chinese economy by around a quarter of a percent of GDP growth. So not anything too serious seemingly. However Trump could go further as he looks to reverse a $375 billion U.S./China trade deficit. The strength of the response in the coming weeks could play a key role in the development of risk appetite,” Hantec said.
Trade talks also play out against questions about an increasingly hawkish composition of Trump’s administration. New national security adviser John Bolton is a hawk advocating a more aggressive stance on North Korea and Iran, and comes hot on the heels of the resignation of the moderate Gary Cohn who was a balancing force as Trump’s economic advisor.
As for gold’s recent performance, “it is incredible to see the support of the long-term pivot band of $1,300/$1,310 holding firm. There has been a suspicion that gold was becoming a yield play, but it was certainly the dollar weakness that played a role in the upside break above $1,341 and as such, dollar moves will be key this week,” said Perry.
Gold eased Monday even as the dollar index remained under pressure. The U.S. Dollar Index DXY, -0.17% fell 0.2% 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.
In other metals trading, May copper HGK8, -1.32% fell 1.5% to $2.9495 a pound, settling down 3.7% for last week. July platinum PLJ8, +0.40% rose 0.2% to $956.40 an ounce. June palladium PAM8, +0.12% rose 0.5% to $976.75 an ounce, after a weekly decline of 1.7%.
Among exchange-traded funds, the iShares Silver Trust SLV, +0.91% was up 0.6% Monday after a weekly rise of 1.5%, while the SPDR Gold Shares GLD, +1.29% added 0.2%, building on a 2.7% gain for last week. The VanEck Vectors Gold Miners ETF GDX, +2.88% was up 0.8%. It gained more than 4% for last week.