Gold prices climb, pare weekly loss as Trump’s remarks slam dollar

Gold prices headed higher Friday, chipping away some of their weekly loss, as comments from President Donald Trump on U.S. interest rates and the dollar, weighed heavily on greenback.

Trump voiced his displeasure with Federal Reserve interest-rate increases in a Thursday interview, prompting a decline in the benchmark dollar index, which gained momentum after he tweeted on Friday, accusing China and the European Union of manipulating their currencies and interest rates:

August gold GCQ8, +0.43%  rose $5.50, or 0.5%, at $1,229.50 an ounce. The contract settled at $1,224 Thursday—the lowest finish for a most-active contract since July 2017. Thursday’s settlement also marked bullion’s entry into correction territory—down more than 10% from its peak on Jan. 15 at $1,362.90. The futures contract faces a roughly 0.9% decline this week, according to FactSet data.

The SPDR Gold Shares exchange-traded fund GLD, +0.53% was up 0.5%, but set for a weekly loss of 1%.

Trump’s latest tweet come amid a smoldering trade spat that has intermittently rattled financial markets.

“Now, you would argue that the Fed is independent and President Trump’s musings would have no impact on Fed policy and this is merely a reaction to an oversold condition and the comments spooked the [gold] shorts,” said Peter Hug, global trading director with Kitco Metals. “But it may be the beginning of a bigger policy, whereby the U.S. wants to drive the dollar lower to make U.S. goods less expensive and offset some of the damage caused by reciprocal tariffs being proposed by our trading partners.”

“The lesson of yesterday was how closely the gold market is marching to the tune of the dollar and how vulnerable the dollar is to any suggestion that the Fed may back off. Volatility will remain with us until the elections in November,” Hug said.

Still, gold paused its retreat Friday in part as some risk-on assets fell. From the market’s riskier corners, oil futures were on track for a third straight weekly decline as Trump said he was prepared to impose tariffs on all Chinese goods imported into the U.S.

Analysts with a longer-term view argue that factors like immediate interest-rate policy and even the risk of trade war don’t undermine the function of gold as an asset.

“We do expect some renewed demand for gold as a haven, or as an inflation hedge, to boost the price to $1,300 per ounce by end-2018,” said the Capital Economics commodities research team, in a note.

”The medium-term outlook for gold is more positive in our view, as we expect the Fed to stop raising rates in 2019. The U.S. economy is also likely to slow next year which, coupled with lower yields and a weaker dollar, would probably give a lift to the price of gold,” they said.

In other trading, September silver SIU8, +0.73% gained 10.8 cents, or 0.7%, at $15.51 an ounce. The contract fell over 1% Thursday to settle at $15.402 an ounce —its lowest close since late 2016. It was headed for a 1.9% weekly loss. The iShares Silver Trust SLV, +0.97% was down 2.2% for the week.

September copper HGU8, +2.04% was up 5.5 cents, or 2%, at $2.751 a pound after settling at nearly $2.696 a pound Thursday, its lowest finish in about a year.

October platinum PLV8, +2.93% climbed by 2.9% to $829.80 an ounce, trading down less than 0.1% for the week. September palladium PAU8, +2.38% gained 2.2% to $885.60 an ounce, but after Thursday’s 4% tumble was looking at a loss of 5.1% on the week.