Gold at one-week high as US-China tensions boost demand

Bengaluru — Gold prices on Tuesday held on to last session’s more than one-week high on concerns over US-China relations and as violent protests in the US stoked fears of a resurgence in virus cases, while optimism on reopening of economies checked their rise.

Spot gold was flat at $1,739.48 an ounce at 3.44am GMT. US gold futures rose 0.1% to $1,752.10.

“It appears that there are factors both supporting, and limiting appreciation in the gold price,” said National Australia Bank economist John Sharma.

The US is likely to revoke Hong Kong’s special status, and China would retaliate by limiting purchase of US products, putting the Sino-US trade deal in doubt, and providing support to gold; while the easing of lockdowns is limiting gains, Sharma said.

In a sign that the worst of the economic downturn from the coronavirus pandemic might be over, US manufacturing activity crawled up slightly from an 11-year low, and China’s factory activity unexpectedly returned to growth in May.

Despite optimism about economies gradually reopening, gold prices have gained in the previous three sessions and hit their highest on Monday since May 21.

Bullion was supported by fears that the demonstrations over the death of an African American man in police custody could worsen the spread of the coronavirus, and hamper the recovery of the world’s biggest economy.

US President Donald Trump stated he would deploy the military, if required.

Reflecting investor sentiment, SPDR Gold Trust, the largest gold-backed exchange-traded fund, said its holdings rose 0.5% to 1,128.40 tonnes on Monday, the highest in seven years.

The dollar hovered near more than a two-month low hit on Friday, making gold less expensive for holders of other currencies.

Palladium rose 0.1% to $1,962.61 an ounce, while platinum was down 0.5% at $843.70, and silver fell 0.6% to $18.17.

Reuters