“You would have thought that trade tensions would be a positive for gold, and we would have seen more safe-haven buying,” Caroline Bain, chief commodities economist at Capital Economics, told The Wall Street Journal. “To be honest it’s been quite a surprise.”
U.S. Dollar Strengthens
The U.S. dollar has strengthened as investors sought safe havens in the greenback and U.S. Treasuries on rising global trade tensions. Gold is priced in USD, so a stronger dollar makes it costlier especially among foreign buyers. Meanwhile, investors liquidated gold holdings to cover losses in equities, commodities and other markets that were declining due to the trade disputes.
“The dollar has just been phenomenal in the past month or so, and I think what it really reflects is everything that gold hasn’t achieved this year,” Oliver Nugent, a commodities strategist at ING, told the WSJ.
Furthermore, rising rate expectations have diminished the appeal for hard assets like gold, which do not provide a yield.
Comex gold futures were trading at around $1,256 per ounce Friday.