Gold reaches 1-week peak as trade worries dent risk appetite

Gold reaches 1-week peak as trade worries dent risk appetite

Mubasher: Gold traded near their highest in more than a week on Wednesday amid rekindled worries on US-China trade row, which is believed to derail global growth, Reuters reported.

At 7:30 am GMT, spot gold rose by 0.14% to $1,286.27 per ounce, after hitting $1,287.94 per ounce, its highest level since 26 April, while US gold futures went up by 0.12% to $1,287.10 per ounce.

US President Donald Trump on Sunday threatened that he would raise tariffs on Chinese goods, while the White House accused Beijing of backtracking from commitments made during trade negotiations.

This reignited worries that an escalation to the trade row between the world’s two biggest economies could curtail global growth, and thus risk-taking sentiment would wane as investors seek safe-haven assets.

“Gold is being supported by risk-aversion buying at the moment, [but] there is no change in the underlying momentum in overall sentiment, which seems to be soft,” OANDA senior Asia Pacific market analyst Jeffrey Halley was quoted by Reuters.

Morgan Stanley Capital International’s (MSCI) Asia-Pacific broad index shares outside Japan reached its lowest level since late March, tracing Wall Street’s slide, according to the news agency.

“Investments are moving into high quality government bonds and Japanese yen rather than gold,” Halley said.

“Downside risks to growth from higher tariffs and the potential for equity weakness and lower yields should support gold [but] potential upside to the dollar would likely act as a headwind to gold,” a UBS research note was quoted by Reuters.

While remaining above $1,280 per ounce seemed encouraging, the extent of the shift by the Federal Reserve’s projections to a dovish stance rendered the yellow metal vulnerable to improvement in data at the time when physical trading is usually quieter due to a weak Chinese demand, UBS said.

The US dollar index, which traces the greenback against a basket of six major rivals, declined 0.11% to 97.5250.