Sep 6, 2019
Gold breaches $1,550 mark for first time in over 6 years
on trade jitters
Gold jumped more than 1% to surpass the $1,550 per ounce mark for
the first time in more than six years on Monday as investors
flocked to safe haven assets driven by the heightened U.S.-China
trade dispute.
Spot gold was up 0.45% at $1,533.1 per ounce, after hitting its
highest since April 2013, at $1,554.56 earlier in the session. U.S.
gold futures were up 0.34% at $1,542.9.
“This is all about the trade tensions and the related risk of
global slowdown or even a global recession that is driving
investors to safe-havens,” said Julius Baer analyst Carsten
Menke.
“There is doubt in markets about these trade talks, so benefit of
doubt or the leap of faith is not provided by financial markets
anymore when it comes to the trade topic, which will be supportive
for gold.”
Washington announced last week an 5% additional duty on $550
billion in targeted Chinese goods, hours after China had unveiled
retaliatory tariffs on $75 billion worth of U.S. products.
However, offering limited respite and limiting gold’s advance, U.S.
President Donald Trump on Monday said China had contacted
Washington overnight to say it wanted to return to the negotiating
table.
While European stock markets recovered slightly following Trump’s
comments, sentiment remained fragile as the heightened tensions
sent investors scrambling into government bonds and whacked
emerging market currencies.
“The thinking might be that there is a little bit more positive
sentiment now on the trade front, so people may be taking some
profits, there are too many longs in the gold market,” said Ronald
Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.
Meanwhile, Federal Reserve Chairman Jerome Powell on Friday 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.
Lower interest rates decrease the opportunity cost of holding
non-yielding bullion and weigh on the dollar, making gold cheaper
for investors holding other currencies.
Reflecting increased investor interest in gold, holdings of SPDR
Gold Trust, the world’s largest gold-backed exchange-traded fund,
rose 0.6% to 859.83 tonnes on Friday.
Elsewhere, silver jumped 1.2% to $17.61 per ounce after hitting its
highest since September 2017 at $17.77 earlier in the session.
Platinum gained 0.9% to $860.90 an ounce and palladium climbed 1%
to $1,475.10.