Gold inches up amid rising US-China tensions

Bengaluru — Gold edged up on Thursday after hitting a two-week low in the previous session as the rift between Washington and Beijing over Hong Kong escalated, with prices also supported by central bank and government largesse to cushion the blow from the coronavirus pandemic.

Spot gold was up 0.2% at $1,712.39/oz, as of 3.15am GMT, after dropping to $1,693.22 on Wednesday. US gold futures were flat at $1,711.40.

Worsening relations between the world’s two biggest economies could further hobble global business activity, which is already under intense pressure due to the coronavirus crisis.

“The US and China have disagreements on many fronts. There is trade, and there is inquiry into the coronavirus, and now this dispute over Hong Kong,” said Michael McCarthy, chief strategist at CMC Markets.

“That’s bad news for the globe as it spills over into trade — the impact on global growth, while the global economies are fragile, could be severe.”

US secretary of state Mike Pompeo said on Wednesday Hong Kong no longer qualifies for its special status under US law, while President Donald Trump said he would announce a response this week.

“The US is likely to respond to China’s new security laws on Hong Kong … Weak economies and continued low interest rates are also supporting gold,” said National Australia Bank economist John Sharma.

Japan approved a fresh $1.1-trillion stimulus package, while the EU unveiled one of €750bn. Large stimulus measures tend to support gold, which is often considered a hedge against inflation and currency debasement.

Reflecting investor sentiment, SPDR Gold Trust holdings, the world’s largest gold-backed exchange-traded fund, rose 0.2% to 1,119.05 tonnes on Wednesday.

Palladium rose 0.4% to $1,943.34/oz and platinum gained 1.4% to $830.21, while silver inched down 0.1% to $17.29. 

Reuters