Gold inched lower on Tuesday as the dollar firmed on worries over a potential new trade action from the United States against China and expectations of a US interest rate increase this month by the Federal Reserve.

Fundamentals

Spot gold was down 0.1 per cent at $1,194.30 at 0106 GMT. US gold futures were mostly steady at $1,199.60 an ounce.

Traders were bracing for a potential escalation in the Sino-US row after President Donald Trump had raised the stakes on Friday by saying that he was ready to impose tariffs on virtually all Chinese imports to the United States.

Views that the US Federal Reserve will raise in September has also made gold investors cautious. Higher rates increase the bond yields, making non-yielding bullion less attractive, and tend to boost the dollar. The dollar index, which measures the greenback against a basket of currencies, was up 0.1 per cent at 95.233.

Brexit deal

Michel Barnier, the European Union's chief negotiator, said an agreement on Britain's exit from the bloc was “realistic in six to eight weeks’’.

Tahoe Resources Inc will work closely with Guatemalan officials and locals to resolve a dispute and resume operations at its flagship Escobal silver mine, one of the world's largest, Chief Executive Jim Voorhees had said on Monday.

Boston Federal Reserve Bank President Eric Rosengren has joined colleagues in beginning to lay the groundwork for rate hikes to potentially continue longer and to a higher level than currently expected as the outlook for the economy strengthens.

Rates may not only need to become “restrictive,” but the definition of that may be moving up as well, Rosengren had said in an interview with Reuters on Saturday.

Canadian Foreign Minister Chrystia Freeland will meet the US Trade Representative in Washington on Tuesday for another round of talks to renew the NAFTA trade pact.

Speculators have ramped up bets on lower prices, with their net short position in Comex gold the biggest since the data were first compiled in 2006. Holdings of gold-backed exchange-traded funds are down almost 5 million ounces, or 8.6 per cent, from a May high.

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