Gold prices scored back-to-back session gains on Wednesday, with global headlines emphasizing trade-war uncertainty, tensions in the Middle East and protests in Hong Kong providing a lift to the haven metal.
“Renewed worries over the U.S.-China trade war and its impact on the global economy are pushing gold higher,” said Mark O’Byrne, research director at GoldCore. Those “trade tensions may be priced in, but an escalation and a move to an all out trade war and the ramifications of that for markets is most definitely not priced in.”
Gold for August delivery on Comex
GCQ19, +0.11%
rose $5.60, or 0.4%, to settle at $1,336.80 an ounce. Futures prices, which have now climbed for 10 out of 11 sessions, are up roughly 2% month to date. The SPDR Gold Shares exchange-traded fund
GLD, +0.52%
was trading up 0.5% Wednesday.
With trade still in focus, most global stock markets declined, boosting the appeal of haven gold. U.S. benchmark stock indexes were trading lower as gold futures settled Wednesday. The precious metal held onto gains after a report showed that the U.S. consumer price index rose a scant 0.1% in April, matching the MarketWatch forecast. It was the smallest increase since January.
“Very low worldwide inflation levels in major economies is giving central bankers more leeway to ease their monetary policies,” said O’Byrne. Precious metals tend to draw buying in a low interest-rate climate.
Save for Monday’s retreat, gold has gained almost uninterrupted for two weeks, inversely following a lower dollar
DXY, -0.05%
and declining Treasury yields
TMUBMUSD10Y, +0.24%
A weaker dollar can be a tailwind for commodities priced in the unit as it makes them less expensive to users of other currencies, and vice versa.
Gold benefited from a sharp slide in U.S. Treasury yields last week as investors increasingly bet the Federal Reserve will move later this year to cut interest rates. Lower yields can be a positive for gold, reducing the opportunity cost of holding the metal.
Investors are watching protests in Hong Kong. Police on Wednesday fired tear gas and high-pressure water hoses at protesters who massed outside government headquarters in opposition to a proposed extradition bill that has sparked concerns over China’s control of the semi-autonomous territory.
Meanwhile, Yemen’s Iran-allied rebels said they launched a cruise missile Wednesday at a Saudi airport, an attack the kingdom said hit the arrivals hall and wounded 26 people, just hours before Japan’s prime minister was expected in Iran for a historic visit aimed at defusing tensions in the Persian Gulf, the Associated Press reported.
“Safe assets should continue to perform well under an escalating trade war, as tariffs imply a tighter U.S. fiscal policy. Also, gold may rally above $1,400/oz if the trade war escalates further,” said Bank of America Merrill Lynch commodities strategists, in a research note.
“Still, cyclical commodities may struggle. Ultimately, the U.S.-China trade war could have very negative consequences for industrial metals and bulks, as China consumes between 45% and 65% of the world’s total,” the strategists wrote. “These raw materials are very sensitive to exports and investment, on our estimates.”
In other metals trade, July silver
SIN19, +0.15%
which serves as both a haven asset and has industrial purpose, added 1.3 cents, or almost 0.1%, to $14.753 an ounce.
July platinum
PLN19, +0.12%
fell $3.80, or 0.5%, to $810.50 an ounce, while September palladium
PAU19, +0.06%
rose $16.40, or 1.2%, to $1,405.60 an ounce. July copper
HGN19, -0.04%
eased 1.75 cents, or 0.7%, to $2.654 a pound.
Source : MTV
