Gold price steadies as Trump ratchets down China trade tension

London (Aug 26)  Gold pared gains after U.S. President Donald Trump said China was willing to resume trade talks, easing demand for the traditional haven metal.

Bullion futures traded down 0.1 per cent at US$1,536.40 an ounce after earlier surging as much as 1.8 per cent on the Comex in New York, to the highest since 2013. The metal jumped Friday as the world’s two biggest economies traded blows.

China has asked to re-start trade talks, Trump said, hours after Beijing’s top negotiator publicly called for calm in response to a weekend of tit-for-tat tariff increases that sent global stocks plunging.

“China called last night our trade people and said let’s get back to the table,” Trump said on the sidelines of the Group of Seven meeting in Biarritz, France. “They understand how life works.”

Gold has surged this year as Washington and Beijing squared off. The fight is hurting economic growth, boosting the likelihood of additional U.S. rate cuts from the Federal Reserve.

“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 before Trump’s latest remarks. UBS raised its 12-month price forecast to US$1,650 an ounce from US$1,500.

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