Gold steadies as strong dollar offsets U.S.-China tensionsGold steadies as strong dollar offsets U.S.-China tensions
A customer tries on gold bracelets at Caibai Jewelry store in Beijing

By K. Sathya Narayanan

(Reuters) – Gold prices steadied on Monday as a strong U.S. dollar countered support from rising tensions between the United States and China over the coronavirus outbreak.

Spot gold was steady at $1,699.49 per ounce by 0601 GMT, having gained over 1% on Friday after President Donald Trump threatened to impose tariffs on China. U.S. gold futures gained 0.4% to $1,707.90.

U.S. Secretary of State Mike Pompeo said on Sunday there was “a significant amount of evidence” that the virus emerged from a Chinese laboratory, but did not dispute U.S. intelligence agencies’ conclusion that it was not man-made.

His comments follow Trump, who on Friday said raising tariffs on China is “certainly an option” as he considers ways to retaliate for the spread of the virus.

“Some sort of fears are there that the trade war might be ignited and such events are good for gold. All these comments from officials indicate a new round of hostility as far as the trade is concerned with China,” said Avtar Sandu, senior commodities manager at Phillip Futures.

Gold had risen 18% last year as the Sino-U.S. trade dispute increased demand for the safe haven amid interest rates cuts by the U.S. central bank.

The U.S. dollar <.DXY> moved away from an over one-month low on Monday, making gold costlier for investors holding other currencies.

“U.S. dollar demand is competing for safe-haven lustre in Asia this morning,” said Stephen Innes, chief market strategist at financial services firm AxiCorp, in a note.

On the macro front, investors will be watching out for the April U.S. jobs report due on Friday.

“Beyond the rhetoric from Washington we would expect gold to consolidate until the non-farm payrolls figures are out. A decline in the (unemployment) numbers wouldn’t be good for gold prices,” Phillip Futures’ Sandu said.

The Federal Reserve has kept interest rates at near zero, with other central banks and governments taking similar measures to cushion their economies from the impact of the pandemic.

The widespread fiscal and monetary impetus will support bullion in the longer term as it is often seen as a hedge against inflation and currency debasement, analysts said.

Reflecting an appetite for gold, holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 1.1% to 1,067.90 tonnes on Friday.

Palladium rose 0.9% to $1,915.99 per ounce, while platinum slipped 0.4% to $757.30 and silver was down 0.5% at $14.86.

(Reporting by K. Sathya Narayanan in Bengaluru; Editing by Amy Caren Daniel)