August 23, 2018 / 1:25 AM / 3 months ago

Gold eases as trade tariffs, rate hike views buoy dollar

NEW YORK/LONDON (Reuters) - Gold prices slid on Thursday, under pressure from a stronger dollar as a prominent U.S. Federal Reserve official reaffirmed the central bank’s intention to raise interest rates and punitive trade tariffs between the United States and China kicked in.

An employee places ingots of 99.99 percent pure gold for weighing at the Krastsvetmet non-ferrous metals plant, one of the world's largest producers in the precious metals industry, in the Siberian city of Krasnoyarsk, Russia September 22, 2017. REUTERS/Ilya Naymushin

Bullion failed to confirm its brief break on Wednesday through $1,200 an ounce, a key psychological level, as the dollar resumed its ascent a day later.

“With the dollar stronger again, gold is sliding today,” said Chris Gaffney, president of world markets at TIAA Bank.

Spot gold XAU= declined 0.7 percent to $1,187.30 per ounce by 1:34 p.m. EDT (1734 GMT). Prices hit their highest since Aug. 13 at $1,201.51 in the previous session.

U.S. gold futures GCcv1 for December delivery settled down $9.30, or 0.8 percent, at $1,194 per ounce, as the dollar rose against a basket of major currencies. .DXY

The Fed’s latest policy meeting minutes suggested it is on course to raise interest rates further after two hikes this year, denting demand for non-interest-yielding gold.

Meanwhile, trade tariffs imposed by the United States and China on each other kicked in on Thursday, benefiting the safe-haven U.S. currency.

Amid shocks to the global financial system caused by the trade war, investors have opted for the safety of U.S. Treasuries and the U.S. currency, making dollar-denominated gold more expensive for holders of other currencies.

Trade tariffs could add to inflation possibilities, Gaffney said.

“Everything is pointing towards inflation returning in the market. When or if companies start to raise prices is still unknown,” he added.

The number of Americans filing for unemployment benefits fell last week but sales of new single-family homes unexpectedly declined in July.

Markets are awaiting Fed Chairman Jerome Powell’s comments on Friday at the central bank’s annual meeting in Jackson Hole, Wyoming for any change in its interest rate stance, especially after U.S. President Donald Trump’s attack on its monetary policy this week. Kansas City Federal Reserve Bank President Esther George said on Thursday that the Fed will move ahead with rate hikes.

Signalling further negative sentiment in gold was a record of net shorts in COMEX gold contracts.

First resistance is seen at the overnight high of $1,203.40 and then at this week’s high of $1,208.40. First support is seen at this week’s low of $1,189.60 and then at $1,180.00, Kitco Metals said in a note.

Spot silver XAG= dropped 1.2 percent to $14.56 an ounce, touching $14.49, a one-week low.

Platinum XPT= fell 1.7 percent to $778.40 an ounce and hit a six-day low at $771.75, while palladium XPD= snapped a five-session winning streak, slipping 1.2 percent to $914.75. Palladium hit a three-week high at $928.50 on Wednesday.

Additional reporting by Nallur Sethuraman in Bengaluru; Editing by Dale Hudson and Steve Orlofsky

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