Gold futures yesterday rallied to more than US$1,500 per ounce on sustained demand for the traditional haven as a US-China trade war festers, global growth slows and central banks worldwide ease monetary policy.
The metal advanced as much as 1.3 percent to US$1,503.30 per ounce on the Comex, the highest since 2013. The move extends this year’s climb to 17 percent, with gains underpinned by inflows into exchange-traded funds.
Central banks in India and New Zealand surprised markets with bigger-than-expected interest rate cuts, boosting speculation that others would follow.
Gold has been one of the chief beneficiaries of the turmoil in global financial markets as Washington and Beijing spar over trade.
In the past few days, US President Donald Trump’s administration threatened fresh tariffs against Chinese goods, the Chinese yuan was allowed to sink and the US branded China as a currency manipulator.
The standoff has boosted the odds of more easing from the US Federal Reserve.
“Gold is serving its traditional role as a safe-haven asset,” said Wayne Gordon, executive director for commodities and foreign exchange at UBS Group AG’s wealth management unit.
Under the UBS’ risk case, marked by a further escalation of the trade fight, prices could go as high as US$1,600, he said.
Futures traded at US$1,497.80 per ounce at 7:55am in London, gaining for a fourth day.
Miners’ shares climbed in Sydney, with Newcrest Mining Ltd jumping as much as 4.4 percent, while Evolution Mining Ltd added as much as 7 percent.
Silver, gold’s cheaper cousin, also surged. Spot prices rallied as much as 2.2 percent to US$16.8082 per ounce, the highest in more than a year.
Bullion has plenty of fans among veteran investors.
Fund manager Mark Mobius last month said that prices were poised to top US$1,500 as interest rates headed lower, adding: “I love gold.”
Billionaire hedge fund manager Ray Dalio has suggested that the market might just be at the start of a period that would be very positive for gold.
In addition to the challenges thrown up by the trade war, there are other risks.
In Europe, investors are tracking the chances of a no-deal Brexit later this year, while there are tensions in the Middle East between Iran and the US.
Further support for the rally has come from central bank buying, with authorities in China, Russia, Poland and Kazakhstan all boosting holdings.
“The unfolding of events since President Donald Trump’s tariffs threat have further diminished the likelihood for a US-China deal in the medium term,” IG Asia Pte Ltd’s Singapore-based strategist Jingyi Pan (潘婧怡) said in an e-mail.
“Given such a backdrop, the natural course of action is perhaps of no surprise to adopt a flight to safety, with gold prices still expected to see further upside,” Pan said.
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