Gold hits 3-week peak as U.S.-China dispute fans growth concerns

London (May 15) - Gold extended gains for a fourth straight session on Friday, hitting a more than three-week high as rising U.S.-China trade tensions fanned fears that the economy reeling from coronavirus will take longer to recover.

Spot gold was up 0.1% at $1,731.11 per ounce by 1026 GMT, after hitting its highest since April 23. Bullion has risen nearly 2% so far this week. U.S. gold futures were steady at $1,740.20. "Gold has been consolidating for weeks and finally broke free yesterday, the momentum from that move could be sustaining the rally," OANDA analyst Craig Erlam said.

"When something has been consolidating for so long, the breakout can be quite explosive as stops are triggered and longs initiated. I feel it may be a combination of the jobless claims catalyst and technical factors here." U.S. economic readings continued to reflect the deeper impact of the pandemic, as data showed 2.98 million Americans filed for state unemployment benefits last week.

A Reuters survey showed an already dismal near-term U.S. economic outlook has darkened further. While a recovery is still forecast in the second half of the year, it won't come close to regaining the ground it lost this year. The focus now shifts to retail sales data due at 1230 GMT that will reflect the impact of stay-at-home orders on the U.S. consumer in April. The pandemic has battered global growth and prompted central banks and governments to roll out massive stimulus measures.

Gold tends to benefit from widespread stimulus from central banks because it is widely viewed as a hedge against inflation and currency debasement. SPDR Gold Trust holdings, the world's largest gold-backed exchange-traded fund, jumped 1.2% to 1,104.72 tonnes on Thursday - its highest in more than seven years. Meanwhile, U.S. President Donald Trump on Thursday said the pandemic had cast a pall over his January trade deal with China, and suggested he could even cut ties with Beijing.

"The background noise for the trade war continues ... Also, oil is going up today which is sort of helping the underlying inflation momentum for gold," said Stephen Innes, chief market strategist at financial services firm AxiCorp.

Elsewhere, palladium climbed 0.5% to $1,844.11 an ounce, but was on track to post its seventh straight weekly drop. Platinum rose 0.7% to $773.22 per ounce. Silver jumped 2.2% to $16.22 an ounce and was set to mark its biggest weekly gain in five.

Reuters

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