Gold extended its rally on Friday, posting the biggest monthly advance since the UK voted to leave the EU in June 2016.
Prices have surged to the highest since 2013 on expectations for looser monetary policy, rising geopolitical tensions and slower global growth as the trade dispute between the US and China drags on.
Gold posted a strong month ahead of a meeting yesterday between US President Donald Trump and Chinese President Xi Jinping (習近平) in Osaka, Japan.
“If you look at gold not only priced in US dollars but in all fear currencies, it’s broken out,” Bank of Nova Scotia commodity strategist Nicky Shiels told Bloomberg News.
Bullion’s gains last week gathered pace after the US Federal Reserve opened the door to a US interest rate cut and other central banks also pivoted to a more dovish stance.
Because global macroeconomic headwinds are simultaneously gaining intensity, Bank of America Corp analysts, including Michael Widmer, expect the US dollar to decline, further boosting demand for gold and possibly sending the metal to US$1,500 an ounce in the next 12 months.
“Bonds and shares at higher — and concerning — levels is another factor, as are fears around trade disputes,” said Michael McCarthy, chief market strategist at CMC Markets Asia Pacific Pty.
Gold futures for August delivery settled 0.1 percent higher at US$1,413.70 an ounce in New York on the Comex and gained 7.8 percent this month. Prices reached as high as US$1,442.90 on Tuesday.
The contract is up 1 percent for the week.
Holdings in gold-backed exchange-traded funds are at the highest since 2013 and have mirrored gold’s price move by also gaining this month by the most in three years, according to data compiled by Bloomberg.
A gauge of the US dollar is down 1.6 percent this month, which would be the first monthly decline for the greenback since January.
The period from the end of this month and into next year is seen as more favorable for higher average gold prices as rising US inflation drives real rates even lower, BNP Paribas SA head of commodity markets strategy Harry Tchilinguirian said in a note.
As the Fed is likely to have made two rate cuts by then, “we see a window of opportunity for gold to rally before inflation subsides in second half of 2020,” he said.
Gold’s rally has been further fueled by an escalation in US-Iran tensions and concerns that trade disputes are harming global growth.
Trump told reporters at the G20 summit in Osaka that there was “absolutely no time pressure” in dealing with Iran as European nations pushed to salvage what remains of the 2015 nuclear accord and avert a slide toward war.
Other precious metals:
‧Silver gained for the first time in four days on the Comex in New York.
‧Platinum climbed and palladium declined on the New York Mercantile Exchange.
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