Published: Thu, September 05, 2019
Markets | By Otis Pena

Gold edges down on stronger dollar, US-China trade woes limit losses

Gold edges down on stronger dollar, US-China trade woes limit losses

The latest escalation in the lingering trade war has been expected since early August when the USA announced plans for the new tariff measures, prompting China to retaliate.

USA markets were closed for a holiday.

Japan's Nikkei slipped 0.2% and Hong Kong's Hang Seng Index retreated 0.4%, as continued pro-democracy protests disrupted airport traffic (link). A forex sales banker in Hong Kong said the PBOC has no clear "line in the sand" for yuan prices and will instead focus on "trying to contain volatility at this point in time".

The United States began imposing 15 per cent tariffs on a variety of Chinese goods on Sunday - including footwear, smart watches and flat-panel televisions - as China began imposing new duties on USA crude. Investors are hoping for progress in talks this month, but analysts warn the fight over trade and technology is unlikely to be quickly resolved.

In Europe, London's FTSE 100 rose 1.1% and France's CAC 40 added 0.2%. An index of Asian stocks .MIAPJ0000PUS was down 0.8%.

Spot gold XAU= added 0.9% to $1,543.47 an ounce. The Dow Jones Industrial Average gained 0.2% to 26,403.28. The Nasdaq fell 0.8%.

"So far Trump appears defiant though on the tariff hikes, blaming the Fed and American companies for their difficulties in dealing with the tariffs", said Shane Oliver, chief economist at AMP in Sydney. A separate survey by an industry group, the China Federation of Logistics & Purchasing, showed activity declining.

Trump accused of using Sharpie-doctored Dorian Alabama map
But a similar image released by the White House last week did not include any impact on Alabama in its forecast. The far western extent of the cone was located more than 240km east of the Alabama border.

Oil prices extended Friday's steep losses owing to worries about the impact of the trade war on demand, while dealers were also concerned about reports that the Russian output cut last month fell short of an agreement with OPEC. Beijing has propped up economic growth by boosting government spending on construction.

In retaliation, China started to impose additional tariffs on some of the USA goods on a $75 billion target list. -China trade war kept prices near multi-year high.

But long-term concerns remain an issue as exports continue to struggle. Apple, which relies on China as a key part of its supply chain, fell 1.7%, while chipmaker Nvidia fell 2.2%.

'Despite the recent rally, we do not yet think a recession is fully discounted in the gold price and we now see gold prices peaking at around $1,780 per ounce by year-end 2020 and averaging $1,418 in 2019 and $1,724 in 2020, ' Wall Street bank JP Morgan said in a note dated August 28.

Meanwhile, in Brexit news, the U.K. Prime Minister Boris Johnson today lost his majority in Parliament as conservative lawmaker Phillip Lee defected to the pro-European Liberal Democrat party. It sank $1.24 the previous session to $59.25.

The dollar slipped to ¥106.20 in Asian afternoon trade from ¥106.26 in NY late on Friday. BDO Unibank Inc., the biggest lender in terms of assets, declined 2.7 percent to P145, while Aboitiz Equity Ventures Inc. lost 1.5 percent to P53.10.

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