· Gold prices touched a more than six-year high on Wednesday, as the trade war between China and the United States showed no signs of abating, boosting the appeal of safe-haven assets.
Spot gold jumped 0.9% to $1,486.41 per ounce as of 0318 GMT. Earlier in the session, it touched $1,489.76 per ounce, its highest since April 2013.
U.S. gold futures too were up 0.9% at $1,497.90 an ounce.
· “Trade wars are the catalyst for the latest gains. Increasingly fiery rhetoric out of Washington and Beijing is fueling worries that the conflict will amount to a longer-term headwind for global growth,” Ilya Spivak, senior currency strategist with DailyFx said.
· China’s exports likely declined for a second successive month in July, according to a Reuters poll, signaling a hit from tariffs in the escalating trade war.
Imports too are expected to post a decline in July, indicating that Beijing’s stimulus measures have failed to curtail falling economic growth.
· Goldman Sachs said it no longer expects a trade deal to be struck before the 2020 U.S. presidential election, while Morgan Stanley warned that more tit-for-tat tariffs could tip the world economy into recession by the middle of next year.
· A Federal Reserve official said on Tuesday it was appropriate to “wait and see” how the upcoming data was, before deciding whether rates should be cut again at the central bank’s next meeting in September.
· Further highlighting concerns that policymakers have about the global economy, New Zealand’s central bank cut interest rates more than expected.
· Indicative of sentiment, SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 0.21% to 836.92 tonnes on Tuesday from 835.16 tonnes on Monday.
· Yields on 10-year U.S. Treasuries were down close to their lowest in almost three years.
· On the technical side, gold may test a resistance at $1,497 per ounce, a break above which could lead to a gain to $1,524, according to Reuters technical analyst Wang Tao.
· A host of global factors mean gold’s price is set to maintain its strength at least for the next six to 12 months, according to an economist from a top Singapore bank.
“The world right now is in a precarious state and gold is due to benefit from this situation,” said Howie Lee, economist at Oversea-Chinese Banking Corporation.
Gold was changing hands at about $1,495 per ounce on Wednesday midday Asia time — having risen nearly $12 on the day. Lee said Tuesday that the metal is set to soon breach $1,500.
“We are seeing a perfect mix of ingredients in the melting pot: We have low rates, we have soft dollar, we have trade tensions, we have geopolitical tensions along the Persian Gulf,” Lee told CNBC’s “Capital Connection.”
He added that such a barrage of risks had propelled gold to its more-than-six-year highs, and is leading investors to take a “risk-off” approach to their portfolios. In other words, investors are uncertain about near-term global economic trends and are likelier to gravitate toward low-risk assets.
“They are piling their funds into gold,” Lee said.
· Gold recorded an aggressive move to the upside recently with the precious metal getting a boost from safe-haven demand spurred by heightened trade war tension between the US and China. The ongoing trade spat between the world’s two largest economies has largely motivated the Federal Reserve and other central banks to cut interest rates hoping to offset economic headwinds from rising market uncertainties.
Spot gold has benefited tremendously from these developments with the commodity running up to multi-year highs. In fact, XAUUSD is now trading around $1,470 which is its highest level since May 2013. While the overarching uptrend is expected to continue, gold prices could be at risk for a modest pullback from its impressive rally.
· Traders are now pricing in a 100% probability of a September rate cut with roughly 75 basis points of cuts to the Fed’s benchmark rate from the current 2.00-2.25% range by year-end according to overnight swaps.
· Among other precious metals, silver rose 1.7% to $16.73 per ounce, its highest since June 2018.
Platinum climbed 1% higher to $855.76 and palladium inched down 0.1% to $1,436.34 an ounce.
Reference: CNBC, DailyFX
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