Gold Futures Settle Moderately Higher On Safe-haven Buying

(RTTNews) - Gold futures settled moderately higher on Monday as prices recovered from early lows, with investors picking up the safe-haven commodity amid fears of a prolonged trade war after U.S. President imposed tariffs on Canada, Mexico and China and warned that the EU and the UK could be the next targets for the levy.

However, the U.S. has decided to postpone implementation of tariffs on Mexico by a month after Trump reached an agreement with Mexican President Claudia Sheinbaum as per which Mexico will immediately reinforce its northern border with 10,000 members of its National Guard to prevent drug trafficking from Mexico to the United States, particularly fentanyl.

Canada and Mexico ordered retaliatory tariffs on American goods, while China vowed countermeasures. The EU also warned of firm retaliation if targeted.

Investors fear that a trade war could hit the earnings of major companies and dent global growth. The tariffs could also lead to renewed inflation fears, leading the Federal Reserve to keep interest rates on hold for longer.

The dollar's strength weighed a bit on gold prices and limited the upside. The dollar index climbed to 109.88 in the Asian session, but dropped to 108.57 before recovering to 108.95, still up fairly above the flat line, gaining 0.54%.

Gold futures for February closed up $21.40 or about 0.76% at $2,833.90 an ounce, a fresh record high.

Silver futures for February settled at $32.392 an ounce, gaining $0.264 or about 0.82%, while Copper futures for February climbed to $4.3085 per pound, gaining $0.0465 or about 1.1%.

In economic news, a report from the Institute for Supply Management showed U.S. manufacturing activity expanded in the month of January. The ISM said its manufacturing PMI rose to 50.9 in January from 49.2 in December, with a reading above 50 indicating growth. Economists had expected the index to inch up to 49.8.

"The PMI has increased for three consecutive months, with the most recent bump finally returning the manufacturing sector to expansion," said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.