* Gold erases earlier gains, heads for first weekly gain inthree
* U.S.-China trade developments strengthen dollar
(Recasts; updates prices; adds comment, second byline, NEW YORKto dateline)By Renita D. Young and Eric OnstadNEW YORK/LONDON, Sept 14 (Reuters) - Gold turned negative onFriday, as the U.S. dollar rose against the Chinese yuan afterU.S. President Donald Trump reportedly told aides to proceedwith tariffs on Chinese imports.
Trump has directed aides to place tariffs on about $200billion of Chinese goods, according to a person familiar withthe matter. Bloomberg News first reported Trump's action. "I think that's what's driving gold lower, the dollar higherand the S&P market lower," said Michael Matousek, head trader atU.S. Global Investors. "Companies are theoretically going tomake less money because they will get that tax."
After the latest U.S.-China tariff development, the dollarindex extended earlier gains against a basket ofcurrencies, including the yuan, while the S&P 500 declined.Spot gold lost 0.5 percent at $1,195.21 per ounce by1:35 p.m. EDT (1735 GMT), having hit its highest since Aug. 28at $1,212.65 on Thursday. It has risen more than 0.1 percent sofar this week, on track for its first weekly gain in three.U.S. gold futures for December delivery settled down$7.10, or 0.6 percent, at $1,201.10 per ounce.
The months-long trade tension between Washington and Beijinghas prompted investors to buy the U.S. dollar, in the beliefthat 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 U.S. interestrate increase. Higher rates make gold less attractive since itdoes not pay interest but costs money to store and insure. Gold prices have declined about 12 percent from a peak of$1,365.23 in April amid the intensifying global trade tensionsand rising U.S. interest rates.
In other precious metals, spot silver dropped 0.4percent at $14.10 per ounce, headed for a 0.1 percent weeklyincrease. Palladium declined 0.4 percent at $978.30, andwas poised for a 0.1 percent weekly decline.
Platinum declined 0.9 percent at $793 an ounce aftertouching a one-month high at $812.30 on Thursday, to end theweek up about 1.9 percent."We've seen some traders dipping their toes back inplatinum, which is at a near record discount to gold," said OleHansen, head of commodity strategy at Saxo Bank."That's probably platinum's best friend at the moment, thatit's relatively cheap, because the concerns about growth and carmanufacturing are still providing some headwinds."Platinum's discount to gold has narrowed to $398 an ouncefrom $417 a week ago and a record of $426 in April. (Additional reporting by Nallur Sethuraman in Bengaluru;Editing by David Evans and Rosalba O'Brien)
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