Gold Tops $1,500 as Investors Seek Shelter From Gathering Storm
Gold futures rallied above $1,500 an ounce on sustained demand for the traditional haven as the U.S.-China trade war festers, global growth slows and central banks around the world ease monetary policy.
Gold has been one of the chief beneficiaries of the turmoil in global financial markets as Washington and Beijing spar over trade. In recent days, the Trump administration threatened fresh tariffs against Chinese goods, the yuan was allowed to sink, and the U.S. branded China a currency manipulator. The stand-off has boosted the odds of more easing from the Federal Reserve. Mounting “growth worries,” prompted Goldman Sachs Group Inc. to predict prices will climb to $1,600 an ounce over the next six months.
Miners also benefited from the rally, with AngloGold Ashanti Ltd. rising 4.8% to its highest price in more than seven years. Kinross Gold Corp., Barrick Gold Corp. and Newmont Goldcorp Corp. also soared.
Last month, the Fed reduced borrowing costs for the first time in more than a decade, responding in part to the impact of the trade war. Lower rates boost the appeal of non-interest-bearing bullion.
The latest ructions have sent investors rushing to havens, pushing the world’s stockpile of negative-yielding bonds to a record, with the market value of the Bloomberg Barclays Global Negative Yielding Debt Index closing at $15.01 trillion Monday. The yield on 10-year Treasuries has tumbled.
Bullion has plenty of fans among veteran investors. Mark Mobius said in July prices were poised to top $1,500 as interest rates headed lower, declaring: “I love gold.” Billionaire hedge-fund manager Ray Dalio has suggested the market may just be at the start of a period that would be very positive for gold.
In addition to the challenges thrown up by the trade war, there are other risks. In Europe, investors are tracking the chances of a no-deal Brexit later this year, while there are tensions in the Middle East between Iran and the U.S.
Further support for the rally has come from central-bank buying, with authorities in China, Russia, Poland and Kazakhstan all boosting holdings. That trend shows no sign of slowing, with the People’s Bank of China addingalmost 10 tons to reserves in July.
“We see the ongoing steep rise in the gold price as an expression of the high risk aversion among market participants,” said Daniel Briesemann, an analyst at Commerzbank AG. “Gold is quite clearly still in demand as a safe haven in the current market environment, as reflected, among other things, in continuing ETF inflows. ”
— With assistance by Krystal Chia