Gold price rallies as investors seek shelter from global trade-tensions

March 23, 2018

New York (Mar 23)  Gold futures surged Friday, as the threat of a looming trade war between the U.S. and China intensified, sending investors fleeing for the perceived safety of precious metals.

April gold GCJ8, +1.04%  surged $12.80, or 1%, to $1,340.50 an ounce, after marking its highest finish since March 7 on Thursday, when it gained 0.5%. Gold has been gaining on weakness for the U.S. dollar in the wake of the Federal Reserve move to raise interest rates this week, but also signal a less-aggressive policy this year.

But investors were turning their attention to global trade wars Friday, as China fired back at the Trump administration’s move to add tariffs on up to $60 billion worth of goods. China’s commerce ministry on Friday said it would impose tariffs on $3 billion in U.S. goods, with officials accusing the U.S. of violating global trade rules.

That “looming trade dispute” is driving gold demand, said analysts at Commerzbank in a note to clients. “This is because it is causing stock markets world-wide to fall, bond yields to decline, and the U.S. dollar to weaken—all of those being factors that are positive for gold,” they said.

The U.S. Dollar Index DXY, -0.21% fell 0.2%, with weakness concentrated against the yen USDJPY, -0.14% which tapped levels not seen since the U.S. presidential election in 2016. Gold and the dollar typically move inversely, as moves in the U.S. unit can influence the attractiveness of commodities to holders of other currencies.

As well, U.S. President Donald Trump replacing former national security adviser Herbert Raymond McMaster with “foreign policy hard-liner” John Bolton, “could make new sanctions on Iran more likely, which no doubt would further unsettle market participants and lend support in turn to gold,” said Commerzbank analysts.

Silver also moved higher, with May futures SIK8, +0.84% up 16 cents, or 1%, to $16.50 an ounce.

May copper HGK8, -0.58%  was down 0.3% to $3.01 a pound. April platinum PLJ8, +0.77%  rose 0.8% to $956.30 an ounce, while June palladium PAM8, -0.36%  fell 0.5% to $976.50 an ounce.

Among exchange-traded funds, the iShares Silver Trust SLV, -1.34%  was up 0.5%, while the SPDR Gold Shares GLD, +0.94%  rose 1% and the VanEck Vectors Gold Miners ETF GDX, +1.67%  was up 1.7%, all in premarket trading.


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