After hitting six-year high, gold slips a little

Bengaluru — Gold steadied on Tuesday after touching a six-year high as simmering tension between Washington and Beijing propelled investors towards safe-haven assets.

Spot gold was little changed at $1,464.15/oz as at 11.39am GMT after hitting its highest since May 2013 at $1,474.81. Prices had jumped as much as 2% in the previous session.

US gold futures were also steady at $1,476.10.

“It all comes down to the US-China situation and how it will pan out. For now, investors are repricing their expectations for when resolution is going to be achieved and many are not expecting it to happen any time soon,” SP Angel analyst Sergey Raevskiy said.

“People are just rebalancing their portfolios in favour of bonds, gold, Japanese yen, Swiss francs and usual safe havens.”

Global equities, meanwhile, continued their sell-off as Washington accused Beijing of currency manipulation after China let the yuan drop to its lowest in more than a decade.

On Monday, the US treasury department said that treasury secretary Steven Mnuchin “will engage with the International Monetary Fund to eliminate the unfair competitive advantage created by China’s latest actions”.

Meanwhile, Wall Street bank Goldman Sachs said it no longer expected the US and China to agree on a truce to end their trade dispute before the 2020 US presidential election, citing “a harder line” taken by policymakers from the world’s largest economies.

The bank’s chief economist, Jan Hatzius, wrote that he expected the US Federal Reserve to cut interest rates twice more in 2019.

Lower interest rates reduce the opportunity cost of holding nonyielding bullion.

ActivTrades analyst Carlo Alberto de Casa said the gold rally was “just the obvious consequence” of investors expecting at least another two rate cuts by the end of 2019.

Interest rates futures implied that traders see a 66% chance of the Fed cutting interest rates to at least 1.75% to 2% in September.

The dollar was also supporting bullion, slipping to a two-week low, while US longer-dated treasury yields registered their biggest fall in 14 months.

Holdings of the largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.5% on Monday.

Among other precious metals, silver inched down 0.1% to $16.37 an ounce, platinum was up 0.2% at $854.97 and palladium rose 1.3% to $1,433.22. 

Reuters