Gold prices turned negative on Tuesday as the dollar strengthened following news that China would retaliate against a new round of US tariffs on its goods. US Treasuries also rose, helping boost the dollar but pressuring gold. China said that it had no choice but to retaliate against new US trade tariffs, raising the risk that US President Donald Trump could soon impose duties on virtually all Chinese goods that America buys.
The US dollar index strengthened against a basket of major currencies. A stronger dollar generally weighs on the price of dollar-denominated gold, which has been losing out on safe-haven flows to the greenback during the months-long US-China trade conflict. The dollar was negative earlier. Spot gold dropped 0.23 percent at $1,197.75 per ounce by 1:33 pm EDT (1733 GMT) in choppy trade. US gold futures
for December delivery fell $3.30, or 0.3 percent, at $1,202.50. Gold prices have declined more than 12 percent since April, hurt by the intensifying trade dispute between the United States and China and as rising US interest rates diminished demand for non-interest-bearing bullion.
"I think there's a secondary factor where higher rates and real rates are helping lift the dollar and that's putting pressure on gold," said Rob Haworth, senior investment strategist for US Bank Wealth Management. Investors are eyeing a meeting by the US Federal Reserve next week at which interest rates are widely expected to be raised, said ActivTrades chief analyst Carlo Alberto De Casa.
"Any comments about the 2019 monetary policy could be a new significant driver for the precious metal," he said. Gold prices were "hovering below massive resistance between $1,205-$1,215 range", said FOREX.com analyst Fawad Razaqzada, pointing out that gold was still in a bearish trend.
Spot silver lost 0.1 percent at $14.14 an ounce. Platinum rose 1.9 percent at $811.30, while palladium gained 2.7 percent at $1,010.72, reaching its highest since mid-June at $1,012.50 an ounce.