Gold turned negative as the US dollar rose against the Chinese yuan after US President Donald Trump reportedly told aides to proceed with tariffs on Chinese imports.
On Friday Trump directed aides to place tariffs on about $US200 billion of Chinese goods, according to a person familiar with the matter.
‘I think that’s what’s driving gold lower, the dollar higher and the S&P market lower,’ said Michael Matousek, head trader at US Global Investors.
‘Companies are theoretically going to make less money because they will get that tax.’
After the latest US-China tariff development, the dollar index extended earlier gains against a basket of currencies, including the yuan, while the S&P 500 declined.
Spot gold lost 0.5 per cent at $US1,195.21 per ounce on Friday, having hit its highest since August 28 at $US1,212.65 on Thursday.
US gold futures for December delivery settled down $US7.10, or 0.6 per cent, at $US1,201.10 per ounce.
The months-long trade tension between Washington and Beijing has prompted investors to buy the US 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 US interest rate increase. Higher rates make gold less attractive since it does not pay interest but costs money to store and insure.
Gold prices have declined about 12 per cent from a peak of $US1,365.23 in April amid the intensifying global trade tensions and rising US interest rates.
In other precious metals, spot silver dropped 0.4 per cent at $US14.10 per ounce.
Palladium declined 0.4 per cent at $US978.30.
Platinum declined 0.9 per cent at $793 an ounce after touching a one-month high at $812.30 on Thursday, to end the week up about 1.9 per cent.
‘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.