Gold gains on fears of mounting US-China trade tensions

Bengaluru — Gold prices gained on Wednesday after hitting a one-week low in the previous session, as fears of escalating US-China trade tensions curbed risk appetite and increased the appeal of safe-haven bullion.

Spot gold was up 0.6% at $1,334.80 an ounce as of 11.34am GMT, its biggest one-day percentage gain since June 3, after falling as low as $1,319.35 on Tuesday. US gold futures were 0.6% higher at $1,339.7 an ounce.

“There seems to be some risk-off sentiment in the market … We’ve now seen prices move up on the back of concerns around [US-China] trade and we think that will continue to underpin a strong performance in gold,” said Capital Economics analyst Ross Strachan.

World share markets snapped a seven-day winning streak on Wednesday after the US toughened its stance on trade with China. US President Donald Trump defended the use of tariffs as part of his trade strategy, while China vowed a tough response if Washington insists on escalating trade conflict amid ongoing negotiations.

Trump also emphasised that he was holding up a trade deal with China and had no interest in moving ahead unless Beijing agrees again to four or five “major points”, which he did not specify.

Trump is expected to meet Chinese President Xi Jinping at the G20 summit in Japan later this month.

Meanwhile, gold bulls are also optimistic about an interest rate cut by the US Federal Reserve. Fed policy makers will meet on June 18 and 19 against the backdrop of rising trade tensions, slowing US growth, and a sharp reduction in hiring last month that has led markets to price in at least two rate cuts by the end of 2019.

The dollar hovered near the two-and-a-half-month low touched last week on growing expectations of a rate cut next week, supporting gold prices further.