PRECIOUS-Gold turns negative as dollar strengthens from U.S.-China tariff spat

Reuters

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    * Gold erases earlier gains, heads for first weekly gain in
three
    * U.S.-China trade developments strengthen dollar 

 (Recasts; updates prices; adds comment, second byline, NEW YORK
to dateline)
    By Renita D. Young and Eric Onstad
    NEW YORK/LONDON, Sept 14 (Reuters) - Gold turned negative on
Friday, as the U.S. dollar rose against the Chinese yuan after
U.S. President Donald Trump reportedly told aides to proceed
with tariffs on Chinese imports. 
    Trump has directed aides to place tariffs on about $200
billion of Chinese goods, according to a person familiar with
the matter. Bloomberg News first reported Trump's action.
 urn:newsml:reuters.com:*:nL2N1W017T
    "I think that's what's driving gold lower, the dollar higher
and the S&P market lower," said Michael Matousek, head trader at
U.S. Global Investors. "Companies are theoretically going to
make less money because they will get that tax." 
    After the latest U.S.-China tariff development, the dollar
index  .DXY  extended earlier gains against a basket of
currencies, including the yuan, while the S&P 500 declined.
 FRX/   urn:newsml:reuters.com:*:nL2N1W015A
    Spot gold  XAU=  lost 0.5 percent at $1,195.21 per ounce by
1:35 p.m. EDT (1735 GMT), having hit its highest since Aug. 28
at $1,212.65 on Thursday. It has risen more than 0.1 percent so
far this week, on track for its first weekly gain in three.
    U.S. gold futures  GCv1  for December delivery settled down
$7.10, or 0.6 percent, at $1,201.10 per ounce. 
    The months-long trade tension between Washington and Beijing
has prompted investors to buy the U.S. dollar, in the belief
that the United States has less to lose from the dispute.  
    Gold has shown a close correlation to the currency of China,
the biggest gold consuming nation, analysts say.
    Meanwhile, investors widely expect another U.S. interest
rate increase. Higher rates make gold less attractive since it
does not pay interest but costs money to store and insure.    
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    Gold prices have declined about 12 percent from a peak of
$1,365.23 in April amid the intensifying global trade tensions
and rising U.S. interest rates. 
    In other precious metals, spot silver  XAG=  dropped 0.4
percent at $14.10 per ounce, headed for a 0.1 percent weekly
increase. Palladium  XPD=  declined 0.4 percent at $978.30, and
was poised for a 0.1 percent weekly decline. 
    Platinum  XPT=  declined 0.9 percent at $793 an ounce after
touching a one-month high at $812.30 on Thursday, to end the
week up about 1.9 percent.
    "We've seen some traders dipping their toes back in
platinum, which is at a near record discount to gold," said Ole
Hansen, head of commodity strategy at Saxo Bank.
    "That's probably platinum's best friend at the moment, that
it's relatively cheap, because the concerns about growth and car
manufacturing are still providing some headwinds."
    Platinum's discount to gold has narrowed to $398 an ounce
from $417 a week ago and a record of $426 in April.

 (Additional reporting by Nallur Sethuraman in Bengaluru;
Editing by David Evans and Rosalba O'Brien)
 ((Renita.Young@tr.com; 1 646 223 8699; Twitter: @RenitaDYoung
twitter.com/renitadyoung))

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