Gold price gains as simmering U.S.-China tensions boost demand

May 28, 2020

New York (May 28)  Gold rebounded on Thursday as deteriorating U.S.-China relations over Beijing's move to impose a national-security law in Hong Kong fanned concerns over quick economic recovery and drove investors towards the safe-haven metal.

Spot gold was up 0.8% at $1,722.70 per ounce by 1054 GMT, recovering from a two-week low of $1,693.22 touched in the previous session. U.S. gold futures rose 0.8% to $1,739.70. "The tensions between U.S. and China continue to be rather on the high side.

Overall, the market is a bit worried about the situation geopolitically and also economically," said Afshin Nabavi, senior vice president at precious metals trader MKS SA. China's parliament approved a national security legislation for Hong Kong on Thursday, fuelling fears it could jeopardise its special autonomy and freedoms. The new security law on Hong Kong has lead to an escalation in trade tension between the United States and China amid Washington ramping up criticism of China over the origins of the coronavirus pandemic.

The escalating tensions have increased interest in gold, which is seen as a safe investment during times of political and financial uncertainty. Reflecting sentiment, SPDR Gold Trust holdings, the world's largest gold-backed exchange-traded fund, rose 0.2% to 1,119.05 tonnes on Wednesday, a seven year high.

"ETF holdings are reaching fresh highs, and we expect investment demand to outweigh the weaker physical offtake in Asian markets. We still see risks skewed to the upside," ANZ said in a note.

Providing additional support to the metal were fresh stimulus boosts, after Japan approved a new $1.1 trillion package, while the European Union unveiled one of 750 billion euros. Investors are waiting for initial U.S. jobless claims data due at 1230 GMT.

Elsewhere, palladium gained 0.9% to $1,952.90 per ounce, platinum rose 2.3% to $837.58 and silver edged 0.1% higher to $17.31.


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