Gold is finally seeing some bullish momentum as trade ructions escalate, fueling the biggest rally among the top miners in seven months.
US President Donald Trump’s plan to impose a 5 percent tariff on all Mexican goods over illegal immigration rattled financial markets, boosting the haven appeal of the metal, which has been weighed down by the strong US dollar.
China’s threat to blacklist foreign firms it accuses of damaging its interests also added to the global uncertainty that is strengthening the case for owning bullion as a store of value.
Global equities recorded the worst month since December last year and there are growing signals that an economic slowdown is imminent, with the outlook for China’s manufacturing sector last month deteriorating more than expected, data showed on Friday.
“The US is demonstrating that they can weaponize trade on a whim,” Oversea-Chinese Banking Corp (華僑銀行) economist Howie Lee said. “From China to Mexico, it sends a message that no country is safe. Gold is picking that up.”
Gold futures for August delivery climbed 1.4 percent to US$1,311.10 an ounce, the highest for a most-active contract since April 10 and up 2.2 percent for the week.
The precious metal rose 2 percent last month, snapping a three-month losing streak.
Silver on Friday also rose 0.47 percent to US$14.59 an ounce, trimming last month’s loss.
A gauge of the biggest gold producers tracked by Bloomberg Intelligence recorded its steepest gain since Oct. 18 last year.
Barrick Gold Corp was among the biggest winners, with shares climbing 5.5 percent. Newmont Goldcorp Corp advanced 3.5 percent.
“The market is kind of risk-off, but the volatility index is up, so people are just buying gold again,” SP Angel Corporate Finance LLP analyst Sergey Raevskiy said in a telephone interview. “People are thinking that this trade war between China and the US may be more protracted than we initially thought.”
The US standoff with China looks set to worsen as Beijing has readied a plan to restrict exports of rare earths to the US.
Prospects of a trade deal with Washington are now less likely after the news on Mexico, analysts said.
Another supportive factor for gold is the potential for a US interest rate cut.
The US Federal Reserve is prepared to ease if it sees mounting risks to the expansion, Fed Vice Chairman Richard Clarida said on Thursday, adding that the economy is in a “very good place” with unemployment low and inflation muted.
These rate cuts provide “considerable scope for gold gains,” Commerzbank AG analyst Daniel Briesemann said. “Silver, too, should benefit in this event, following gold’s upward course. At the moment, though, silver remains relatively weak.”
Platinum futures were steady after tumbling 11 percent last month on the New York Mercantile Exchange, posting the biggest monthly loss in more than three years.
Palladium futures fell.
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