Gold Rips to Two-Month High as Recession Concerns Burnish Safe-Haven Appeal
The comments below are an edited and abridged synopsis of an article by Reuters
Gold has risen to its highest in more than two months, as heightened US-China trade tensions and Washington’s threat of tariffs on Mexico stoked worries of a global recession and drove investors to seek refuge in safe-haven bullion.
“We are seeing a lot of traditional safe-haven hedging… coming back to the fray,” said Stephen Innes, managing partner, SPI Asset Management.
“(Equity) markets seemed to be a little bit complacent. What caught them off guard was Trump doubled down, signaling that [dealings between countries] on the trade war front is going to be quite aggressive.”
US stock futures, Asian share markets and crude oil prices slipped to multi-month lows on June 3 amid the mounting trade worries. Tensions between the US and China escalated over the weekend as the two countries clashed over trade, technology and security.
“[Gold] markets are underpositioned, and that’s why we are seeing investors aggressively chasing prices. There are bets getting placed on a more aggressive rate cut, another reason why we are seeing prices moving higher,” Innes said.
In a sign that US-China frictions are putting a strain on the global economy, South Korea’s exports fell 9.4% in May, worse than a median forecast for a 5.6% decline. The gloomy outlook has prompted traders to increase bets that the Fed will cut interest rates sooner rather than later.
“Gold finally behaved like a safe haven last week, breaking out higher after the trade war escalation led to a code red for global growth,” Edward Moya, senior market analyst at OANDA, said in a note.
Gold prices surpassed the key $1,300 level for the first time since April after being stuck in a range for weeks.
Hedge funds and money managers increased their net long positions in COMEX gold in the week to May 28, data showed.
In other precious metals, silver rose 0.6% to $14.65; platinum rose 1% to $799.73; and palladium rose 1.7% to $1,347.10.