Gold climbs as US-China geopolitical risks keep market on edge

GOLD extended gains as geopolitical tensions between the US and China intensified, boosting haven demand.

Bullion was hovering near a 4-week high as the fallout from US House Speaker Nancy Pelosi’s visit to Taiwan kept markets on edge. While anxiety eased somewhat after the trip ended, China has since started military drills in areas surrounding the island.

Gold rose even after Federal Reserve officials pledged the central bank would continue an aggressive fight to cool soaring inflation. The Bloomberg Dollar Spot Index was little changed after slipping earlier on Thursday (Aug 4). China fired 11 Donfeng ballistic missiles into waters surrounding Taiwan in the biggest test in decades.

“Gold is pushing higher again this morning as yields ease off this week’s highs and the dollar softens,” Craig Erlam, a senior analyst at Oanda Corp, said in a note. Recession fears may also support bullion as they could “trigger safe-haven flows”, he said, suggesting a push towards US$1,800 is possible.

Investor sentiment towards bullion may be turning after a sell-off in July, noted Rhona O’Connell, an analyst at StoneX. Still, recent price moves “aren’t much more than a correction from the recent falls”, she said.

“The technical parameters are all much more positive than hitherto, and this will be helping,” O’Connell added. “ETFs are seeing some light buying, which may also influence sentiment.”

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Spot gold climbed 1.2 per cent to US$1,787.17 an ounce as at 3.8 pm in London. It touched US$1,788.05 on Tuesday, the highest intraday level since Jul 5. All precious metals advanced, with palladium leading at a 4 per cent increase. BLOOMBERG