Gold Hovers Near Six-Year High as U.S.-China Trade War Drags On
Gold’s safe-haven rally was back on Monday, as the yellow metal returned to six-year highs over civil unrest in Hong Kong and ongoing U.S.-China trade tensions. European and U.S. stock markets were down across the board as risk sentiment continued to wane.
Gold Continues Higher
Less than a week after hitting $1,500 for the first time since 2013, gold was back on the offensive Monday, gaining as much as 0.8%. The December futures contract was last up $8.60, or 0.6%, to $1,517.10 a troy ounce on the Comex division of the New York Mercantile Exchange.
December gold is the most actively traded futures contract. On Monday, volumes were 276,950, according to Bloomberg.
Silver prices also advanced in early-week trading, climbing 12 cents, or 0.7%, to $17.06 a troy ounce.
Gold’s premium over silver has declined over the past month, which reflects the grey metal’s oversized gains over that period. Silver has gained 12% since July 12.
The U.S. dollar was down slightly against a basket of currencies on Monday. The DXY dollar index, which measures the greenback’s performance against six competitors, edged down 0.1% to 97.43.
Trade Tensions Hang in the Balance
Gold’s recovery gathered pace last Monday after China let the yuan renminbi slide against the dollar, a move that was widely viewed as an escalation of the year-long trade dispute. As the yuan fell 1.9% to 11-year lows, the U.S. government officially labeled China a currency manipulator.
On Friday, President Trump said he was not ready to make a deal with China and warned that upcoming talks scheduled for September could be called off.
U.S.-China trade tensions are putting downward pressure on the global economy, with bond markets sending a clear warning that recession was looming. Weak growth in developed markets, negative debt yields around the world and dovish central banks have combined to form the perfect storm for haven assets like gold.
Against this backdrop, investment bank Goldman Sachs has upgraded its forecast for bullish for the first time this year. As Kitco, reports, the investment bank’s three-month projection for bullion is now $1,575 a troy ounce. Goldman says that number is headed to $1,600 in six months.
Apparently, Goldman is also bullish on bitcoin. In a recent note to clients, the bank said investors may want to consider buying the dip. Using Elliott Wave analysis, Goldman says bitcoin could target $13,971 in the near term.
Bitcoin and gold are moving in lockstep with one another for the first time in three years, according to a recent analysis by Bloomberg. Since May 8, the two assets have moved in tandem 58% of the time.
“The evidence is growing that investors – rightly or wrongly – see Bitcoin as a refuge in times of turbulence,” Bloomberg concluded.
Featured image courtesy of Shutterstock. Charts via Bloomberg.