Spot gold jumped 0.9% to $1,539.70 per ounce as of 0414 GMT, having earlier touched $1,554.56 an ounce, its highest since April 2013.
U.S. gold futures were up 0.8% at $1,549.50 an ounce.
· On Friday, U.S. President Donald Trump announced a 5% additional duty on $550 billion in targeted Chinese goods, hours after Beijing unveiled retaliatory tariffs on $75 billion worth of U.S. 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 U.S. 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,” said OANDA analyst Jeffrey Halley.
· 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 Powell said the U.S. 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 next month, and over 100 basis points of easing by the end of next year.
· 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, said Reuters technical analyst Wang Tao.
· 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 tonnes on Friday.
· Hedge funds and money managers increased their bullish stance in COMEX gold in the week to Aug. 20, the U.S. Commodity Futures Trading Commission said on Friday.
· Gold: Risk aversion takes a halt after US/China headlines aim to calm trade war fears
Having surged to the fresh high since April 2013, Gold declines to the intra-day low of $1,538.50, before taking rounds to $1541.60, by the press time of early Monday.
The yellow metal earlier soared as the US-China trade war headlines triggered the risk aversion wave at the week-start. The US and China both increased tariffs on each other’s goods worth of billions of US Dollars (USD) on late-Friday.
However, latest news from the Wall Street Journal quotes some of the US President Donald Trump’s aides, including White House Economic Adviser Lawrence Kudlow, while saying that the President Trump has no plans to invoke emergency powers and force companies to relocate operations from China, two days after his Friday tweet that they were “hereby ordered” to look for alternative locations.
On the other hand, China’s Vice Premier Liu He also showed readiness, via Reuters, to resolve the trade dispute with the US via calm negotiations. Mr. Liu also said that China resolutely opposes the escalation of the trade war, which is not beneficial for the US or China.
Technical Analysis
FXStreet Analyst Ross J Burland spots $1535 and $1531 as the key supports during the present upside:
The bulls penetrated above the 1535s and fell just a few bucks short of the 127.2% Fibo target which is located around 1,560, guarding the Oct 2012 highs at 1795. On the downside, the 23.6% Fibo and 38.2%Fibo of the opening rally are located at 1540 and 1531. However, should there be some fundamental switch up, bears can target a 23.6% retracement of the prior rally to 1472 ahead of a 50% mean reversion to1401.
· A dovish-enough Federal Reserve and a new salvo from China in the ongoing trade war generated new renewed optimism among gold bulls, according to the Kitco News weekly gold survey.
· David Madden, market analyst at CMC Markets said that although Powell sent mixed messages in his Jackson Hole speech, the message still had a dovish tilt, which will continue to support gold prices.
“The overall message is that the Fed is ready to act if the economy gets worse,” he said. “I don’t think we are going to see a lot of improvements in the near-term and gold will continue to go higher as the global economy worsens.”
· Bill Baruch, president of Blue Line Futures, said that he also sees higher gold prices in the near-term as it looks like Powell “nudge the monetary policy needle” to more dovish territory.
· Colin Cieszynski, chief market strategist at SIA Wealth Management, said that although Powell is reluctant to embark on a new easing cycle, the growing trade war create enough pressure to do something.
However, Cieszynski said that he is neutral on gold in the near-term because momentum indicators are still negative. He added that how much of this trade-war uncertainty is already priced into the market.
Although prices may struggle to move higher next week, Cieszynski said that he is in no hurry to sell gold.
“Gold is in a well-established uptrend and there is showing really strong support at $1,500 and $1,480,” he said.
· Adrian Day, chairman and chief executive officer of Adrian Day Asset was the lone gold bear in this week’s survey but even is negative outlook is conditional.
“Any pullback will be temporary, since we are most likely to see easier policies before year end and the gold market recognizes this,” he said.
· Gold continued to rise as it added another $13 closing well above the previous close clearly suggesting the mood of the market as investors kept flocking to the safety of gold in a very volatile environment shadowed by pessimism of a big economic slowdown. Gold failed to make a new high which can be a negative but nevertheless situation both fundamentally and technically support higher prices. We have 2scenarios –
1. Gold closed above the support, till this is held it can move to $1541. Once this is crossed it can rally to $1554. And if this is taken out it can move towards $1571.
2. Short trades remains nullified as bullishness continues except scalp trades.
· Gold will extend its winning ways as the U.S.-China standoff harms growth, risking a deeper slowdown and inviting more central-bank easing, according to UBS Group AG, which jacked up price forecasts with a prediction the precious metal may hit $1,600 within three months.
“The trade war between the U.S. and China has escalated to a new level,” Giovanni Staunovo and Wayne Gordon, analysts at the wealth-management unit, said in a report received on Monday. “Gold has demonstrated its safe-haven qualities and we stay long the metal, a trade we initiated in mid-May.”
Gold is proving its worth as a haven this year as the two largest economies trade blows, with a significant escalation on Friday, followed by more hard-line remarks from President Donald Trump over the weekend. The Federal Reserve reduced interest rates last month as risks mounted, and some U.S. policy makers have stepped up their warnings about the outlook in recent days.
Futures rallied as much as 1.8% to $1,565 an ounce on the Comex, the highest since 2013. After its revisions, UBS has a three-month trading range of $1,450 to $1,600, plus a six-month forecast of $1,600 and12-month view of $1,650. Previously, both the half-year and 12-month outlooks were set at $1,500.
· Amid the escalating uncertainty, Standard Chartered told its clients to look at putting their money in gold,
“Gold was an asset class that for many, many years ... we shunned,” he said. “But last month, we upped gold to a preferred status to reflect that ... increased anxiety, increased uncertainty.”
Spot gold, which crossed the $1,500 per ounce barrier earlier in August, last traded at $1,533.00.
“I would not be surprised if — and I emphasize if — the U.S. were to slide into recession that we would see ... upwards of $2000 on the gold price,” McDonnell said.
· 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.
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