· Gold surged 2% on Monday to its highest level in more than six years as a worsening U.S.-China trade conflict prompted investors to dump riskier assets for safe havens, with a weaker dollar supplying additional fuel for bullion’s run.
· Spot gold was up 1.7% at $1,464.72 per ounce as of 1:33 p.m. EDT (1733 GMT), after hitting its highest level since May 2013 at $1,469.60. U.S. gold futures settled 1.3% up at $1,476.50.
· In the latest flare-up in a long-drawn trade spat, China on Friday said it would fight a decision by U.S. President Donald Trump to slap an additional 10% tariff on $300 billion worth of Chinese imports.
· “What is driving gold is fear of these tariffs and the fear of China retaliating,” said Michael Matousek, head trader at U.S. Global Investors. He added that a host of uncertainties surrounding the global economy, an environment of negative bond yields and an ongoing currency war were making the case for gold.
“Gold is in a bull market and is going to trend higher. This is just a start of another wave going up. I would not be surprised to see gold hit the $1,500 level by November-December and keep it sustained there.”
· Trump’s tariffs on China may force the U.S. Federal Reserve to cut interest rates more than it had hoped was necessary to protect the economy from trade-related risks.
· “All this volatility, growth fears, persistent weakness in economic data will be good enough for a risk-off environment,” said Benjamin Lu, an analyst at Phillip Futures.
· The dollar slipped to near a two-week low against key rivals, making bullion cheaper for investors holding other currencies, but rose against the Chinese yuan. Trade worries also drove a sell-off in global stock markets.
· China let its yuan weaken below the seven-per-dollar level on Monday, an 11-year low, while the offshore yuan fell to its weakest since international trading of the Chinese currency began.
· “This might encourage some more gold buying in China as a weaker yuan means a stronger dollar, and gold provides you exposure to the dollar, which makes gold attractive for the Chinese,” Julius Baer analyst Carsten Menke said.
· The Shanghai Gold Exchange said it would raise the margin requirement on its AU(T+N2) gold contract. The trading limit on the contract would also be raised.
· In India, gold imports for July plunged 55% from a year ago to the lowest level in three years as local prices jumped to a record high.
· Meanwhile, holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose to 830.76 tonnes on Friday.
· Among other metals, silver rose 1.1% to $16.39 per ounce. Platinum was up 1.4% to $854.49 per ounce, while palladium rose nearly 1.3% to $1,424.06 per ounce.
Reference: Reuters
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