Gold, already at multiyear highs, tacks on another 1.5% as trade worries deepen

Gold’s haven appeal boosted the metal again on Monday as an escalating U.S.-China trade fight sparked a selloff in assets perceived as risky.

Gold on Friday notched its highest finish in more than six years, a day after President Donald Trump intensified a trade fight with China by announcing additional tariffs on Chinese goods and China pledged retaliation.

China’s yuan currency USDCNH, +1.6770% on Monday fell to its lowest level in more than a decade, breaching the 7-to-the-dollar level. Investors took that as a sign Beijing could allow further weakness, with the potential to further intensify trade tensions.

Gold for December delivery GCZ19, +1.27% on Comex rose $21.80, or 1.5%, to $1,479.60 an ounce. The contract settled Friday at $1,457.50 an ounce. That was the highest most-active contract finish since May 9, 2013, according to FactSet data. Prices ended about 2.7% higher for last week.

“The yellow metal is on the verge of a making for a run towards the $1,500 an ounce level and after that there is not much resistance until the $1,650 region,” said Edward Moya, senior market analyst at Oanda. “The trade war, a negative global interest-rate environment and weak corporate earnings are all positive catalysts for the remainder of the summer for gold.”

September silver SIU19, +1.08% — which because of its industrial use in addition to haven status can be negatively impacted by the trade news — added 26 cents, or 1.6%, to $16.53 an ounce Monday. It posted a loss of 0.8% for last week, however.

Gold gained as the Dow Jones Industrial Average DJIA, -1.88% fell 1.7% and the S&P 500 SPX, -1.93% dropped 1.8%. The Nasdaq COMP, -2.54% shed 2.3% as China-sensitive tech stocks came under pressure. The S&P 500 and Nasdaq on Friday logged their biggest weekly declines of 2019.

Benchmark Treasury yields TMUBMUSD10Y, -4.02%, another haven investment, dropped to 1.769% as prices and yields move inversely. The U.S. Dollar Index DXY, -0.45% fell 0.4%, boosting the appeal of U.S. dollar-priced gold to investors using another currency.

“With the negative U.S. economy implications from the trade tariffs and the market pricing for the requirement for further rate cuts, the dollar is being pressured,” said Richard Perry, analyst with Hantec Markets. “This is a double positive impact on gold. Fundamentally, with real yields falling, gold will continue to rise.”

“Weakness will be seen as a chance to buy, on a fundamental perspective and with the technicals also remaining strong, the outlook for further upside looks strong,” he added.

Meanwhile, industrial metals traded mixed. October platinum PLV19, +0.54% gained $5.50, or 0.6%, to $858.50 an ounce, after a weekly decline of around 1.7%. September palladium PAU19, +1.19% lost $3.10, or 0.2%, at $1,401.10 an ounce. Palladium logged at an 8.3% drop for last week.

MarketWatch

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Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya