Trade war talk pushes gold prices higher as dollar eases

[NEW YORK] Gold prices rose on Friday as the threat of a global trade war pushed equities and the US dollar lower and spurred demand for assets such as bullion that are broadly seen as safe-haven investments.

US President Donald Trump's decision on Thursday to place tariffs on imports of aluminium and steel raised fears of retaliation by other countries and knocked the dollar from a six-week high, making dollar-denominated gold cheaper for users of other currencies.

"Trade in gold today is stepping back and looking at tariffs as a potentially more dovish scenario: weaker economic growth, lower real yields and a weaker dollar are impacting trade," said Rob Haworth, senior investment strategist for US Bank Wealth Management.

Spot gold rose 0.5 per cent at US$1,322.54 per ounce by 1.43pm EST (1843 GMT).

US gold futures for April delivery settled up US$18.20, or 1.4 per cent, at US$1,323.40 per ounce.

Gold, however, was still down 0.5 per cent on the week, putting the yellow metal on track for a second consecutive weekly loss.

Bullion touched US$1,302.61 per ounce on Thursday, the lowest level since Jan 2, pressured by expectations that the US Federal Reserve will raise interest rates more aggressively than previously thought.

Higher interest rates are gold-negative since they raise bond yields and tend to boost the dollar, reducing the attractiveness of non-yielding bullion.

But the threat of a global trade war overpowered any fears of rate hikes, said Saxo Bank analyst Ole Hansen.

"If a trade war becomes a reality, it could push inflation up and growth down and that should ease the aggressiveness of the Fed. That's why it has become the focus" of the gold market, he said.

Also positive for gold was its ability to hold above its technically important 100-day moving average price at US$1,300, also a key psychological level for investors.

Near-term technical resistance was at the 50-day moving average at US$1,324.60, analysts at ScotiaMocatta said.

Supporting bullion prices was an increase in holdings of gold in exchange-traded funds tracked by Reuters of nearly 17 tonnes, or 1 per cent, since mid-February.

"Evidently some investors viewed the low price level as a buying opportunity," analysts at Commerzbank wrote.

Meanwhile, silver gained 0.2 per cent at US$16.49 an ounce, off a two-month low hit Thursday. It was barely changed from last week.

Platinum dropped 0.2 per cent to US$963.90 an ounce, near two-month lows and down 3.2 per cent this week.

Palladium increased 0.5 per cent to trade at US$993.80 an ounce, but was down 5 per cent this week after suffering its biggest fall in over a year on Thursday.

REUTERS