Gold price hits 2018 low as trade comments lift stocks, dollar

London (May 21)  Gold marked a new low for the year on Monday after U.S. Treasury Secretary Steven Mnuchin declared that a trade war between China and the United States was "on hold", sparking a rally in stocks and the dollar.

Buoyancy in U.S. Treasury yields also weighed on appetite for non-interest bearing assets such as bullion, analysts said.
           
Spot gold fell to its lowest since late December at $1,281.76 an ounce, and by 0935 GMT was down 0.5 percent at $1,284.70 an ounce. U.S. gold futures for June delivery were 0.6 percent lower at $1,283.80.

"The dollar's riding high, and the 10-year yield has broken above 3.05 percent for the first time since 2011," Mitsubishi analyst Jonathan Butler said. "This is taking place at a time when we're very close to all-time highs in the U.S. equity markets, and all of this positive news about jobs, about productivity, is feeding into a move towards risky assets."
    He said gold could benefit from safe-haven buying in the
long run if that exuberance loses steam and inflation pressures
mount. But he added: "It's possible that we might see a further
correction in the very short term. That will of course depend on
the newsflow, and whether the dollar can hold onto its gains."
    Gold prices fell below the psychologically important level
of $1,300 an ounce last week, and posted the first weekly close
below their 200-day moving average since late December.
    A stronger dollar makes assets priced in the U.S. currency
more expensive for holders of other currencies, while a bounce
in yields had added to pressure on gold.
    The metal is also being weighed down by expectations that
U.S. Federal Reserve will lift U.S. interest rates again next
month, further hurting demand for non-yielding assets.
    Naeem Aslam, chief market analyst at Think Markets, said
investors were now looking ahead to this week's meeting of the
Federal Open Market Committee, which sets rates. "If the Fed
doesn't tame its hawkish stance, we would expect more weakness
in the gold price," he said.
    Hedge funds and money managers cut their net long position
in COMEX gold contracts by 21,294 contracts to 31,327 in the
week to May 15, data showed on Friday.                
    Among other precious metals, platinum was down 0.3
percent at $879.80 an ounce, after also marking a fresh low for
the year in earlier trade at $873.50.
    Silver was down 0.6 percent at $16.33 an ounce, while
palladium, the most industrial of the major precious
metals, was up 0.7 percent at $969.72 an ounce, bucking the
falling trend.

Reuters