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Gold Spins Wheels Amid Weak Stocks, Demand Worries, Strong Dollar

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Gold Spins Wheels Amid Weak Stocks, Demand Worries, Strong Dollar

(Kitco News) - Gold futures were held back by a muscular U.S. dollar and ideas that any further weakness in China’s economy due to U.S. tariffs could dent physical demand from the key gold-buying nation.

U.S. equities have been on the defensive since news that President Donald Trump threatened more tariffs on China at a time when many market participants thought the two countries were nearing a trade agreement.

As of 11:45 a.m. EDT, the Dow Jones Industrial Average fell by around 230 points. Earlier in the day, the Dow futures were down by roughly 500 points.

Meanwhile, Comex June gold was down $1, trading at $1,280.30 an ounce.

“Considering the news, you would think gold would have some lift,” said Bob Haberkorn, senior commodities broker with RJO Futures. “The problem is the dollar has been strong.”

The dollar index was up 0.082 points at 97.602. The situation is similar to the past when the greenback often drew a bid whenever trade tensions escalated.

“It [renewed trade worries] came out of nowhere, and the dollar benefited from that,” Haberkorn said.

Live 24 hours gold chart [Kitco Inc.]

Gold tends to benefit from dollar weakness on buying as an alternative currency, and vice-versa. Further, a stronger dollar tends makes commodities more expensive in other currencies and thus can hurt international demand, and vice-versa.

Phil Flynn, senior market analyst with at Price Futures Group, listed yet another way the Trump tariff threat has hurt gold. More tariffs would presumably hurt China’s economy further, thus consumer buying of the precious metal.

“I think the concern was if there are more tariffs on China, the physical demand from China … might come down a bit,” Flynn said.

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