Gold hits more than six-year high as investors run for shelter

Bengaluru — Gold prices scaled a fresh six-year high on Monday, as the latest tit-for-tat tariffs by the US and China in their year-long trade war battered global equities and boosted demand for safe-have assets.

Spot gold jumped 0.9% to $1,539.70 per ounce in early-morning trading, having earlier touched $1,554.56 an ounce, its highest since April 2013.

US gold futures were up 0.8% at $1,549.50 an ounce.

On Friday, US President Donald Trump announced a 5% additional duty on $550bn in targeted Chinese goods, hours after Beijing unveiled retaliatory tariffs on $75bn worth of US products.

“Gold was the beneficiary of President Trump’s tweetstorm on Friday,” said Stephen Innes, managing partner at VM Markets.

Equity markets plunged in response, with the US stocks plunging on Friday, and the Asian ones following on Monday.

Traders were also tracking the Group of Seven summit, where Trump indicated he may have had second thoughts on the tariffs.

Later, the White House clarified that Trump wished he had raised tariffs on Chinese goods even higher last week.

Gold retraced some of the earlier gains as traders locked in gains.

“What we are seeing right now is a bit of profit taking coming in, but that doesn’t change the overall sentiment for gold,” Oanda analyst Jeffrey Halley said.

Meanwhile, in a possible softening, Chinese Vice-Premier Liu He said on Monday that China opposes the escalation of the trade conflict, a state-backed newspaper reported.

On Friday, Fed chair Jerome Powell said the US central bank will “act as appropriate” to keep the economy healthy, although he stopped short of committing to rapid-fire rate cuts.

The markets are fully priced for a quarter-point cut in rates in September, and more than 100 basis points of easing by the end of 2020.

Yields on 10-year Treasury notes dived from a top of 1.66% on Friday, leaving them almost matching two-year yields.

The drop in yields caused the dollar index, which measures the greenback’s value against a basket of six major currencies, to slide 0.5% on Friday, and was hovering close to that level.

Lower bond yields and a weaker dollar reduce the opportunity cost of holding non-interest bearing gold.

Spot gold may peak in a range of $1,546-$1,569 per ounce, Reuters technical analyst Wang Tao said.

Indicative of market sentiment, SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 0.58% to 859.83 tons on Friday.

Hedge funds and money managers increased their bullish stance in Comex gold in the week to August 20, the US Commodity Futures Trading Commission said on Friday.

Elsewhere, silver was up 1.3% at $17.62 per ounce and platinum gained 1% to $862.

Palladium climbed 0.5% to $1,467.23 per ounce.

Reuters