Gold rallies towards US$1,600 as US-China trade war bites

Singapore

GOLD took a significant stride towards US$1,600 an ounce as the US-China trade war worsened, hurting the outlook for global growth and boosting demand for the traditional haven as risk assets suffered.

Bullion futures rose as much as 1.8 per cent to US$1,565 an ounce on the Comex, the highest since 2013. Silver was also favoured, with spot prices up as much as 2.1 per cent. The advances in the week's opening session followed gains on Friday.

"Gold has demonstrated its safe-haven qualities and we stay long," Giovanni Staunovo and Wayne Gordon, analysts at UBS Group AG's wealth-management unit, said in a report received on Monday that raised price forecasts.

"The trade war between the US and China has escalated to a new level." Gold is showing its mettle once again as a store of value during times of crisis, surging more than 20 per cent this year as Washington and Beijing have squared off.

The two sides traded fresh blows on Friday, and over the weekend, President Donald Trump kept up his hard line. The fight is hurting economic growth, boosting the likelihood of additional US rate cuts from the Federal Reserve.

As most raw materials fell, precious metals are "the standout sector, as gold prices rallied", Australia & New Zealand Banking Group Ltd said in a note.

Fed policymakers have made the case that trade disputes are poisoning the global economy and making their job more difficult. On Monday, the yield on US 10-year Treasuries sank to 1.4409 per cent, the lowest level since 2016.

With gold futures one per cent higher at US$1,552.60 at 7.38am in London, miners' shares surged. In Sydney, Newcrest Mining Ltd rallied as much as 6.7 per cent.

As gold's rally has gathered pace, investors have pushed into bullion-backed exchange-traded funds, which have hit the highest since 2013. Holdings are set for a third monthly gain, according to data compiled by Bloomberg.

Gold "should continue to soar" as investors seek havens from trade tensions and further Fed easing, said Helen Lau, an analyst at Argonaut Securities Asia. "Meanwhile, currency depreciation should lead to more diversification away from risk assets in general into gold or gold-related stocks." BLOOMBERG

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