Gold dips as dollar holds onto gains; US-China spat in focus

Gold prices fell on Monday as the dollar held onto gains made after better-than-expected US payrolls data, while investors kept a close eye on Sino-US relations ahead of scheduled trade talks.

Spot gold was down 0.2% to $2,030.10 per ounce by 0545 GMT. US gold futures rose 0.6% to $2,040.80.

Gold hit a record high of $2,072.50 on Friday before retreating nearly 2% as the dollar bounced on data showing US nonfarm payrolls increased by 1.763 million jobs in July.

"The stronger dollar narrative is weighing on investors' decisions, along with the fact that people will be more (prone) to profit-taking after such a big run-up," said Stephen Innes, chief market strategist at financial services firm AxiCorp.

"A correction is very possible here. It really depends on how market views the overall dollar, with US-China trade escalation sort of favourable to the dollar." The dollar has, on occasion, been the favoured safe haven amid flare-ups in tensions between Washington and Beijing. 

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Last week, US President Donald Trump took steps to ban two popular Chinese apps. "There is room here for people to unwind some of their gold exposure," said DailyFx currency strategist Ilya Spivak, since it appears the US Federal Reserve might start "to take their foot off the gas" on aggressive stimulus after recent better economic data.

Speculators reduced their bullish positions in COMEX gold and silver contracts in the week to Aug. 4.

But gold's appeal as a safe haven has been underpinned by the uncertainty driven by the COVID-19 pandemic, with resultant widespread global stimulus also fuelling concerns of inflation.

In the United States, which has marked a grim milestone of 5 million cases, Trump signed executive orders on Saturday partly restoring enhanced unemployment payments to millions of Americans.

Silver eased 0.2% to $28.24 per ounce, while platinum rose 1.2% to $972.93 and palladium was steady at $2,177.04. 

Reuters