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Gold hovers near 6-yr high on stronger safe-haven demand

Gold hovers near 6-yr high on stronger safe-haven demand

Mubasher: Gold prices climbed on Wednesday, hitting earlier in the session its highest level since more than six years, with investors fleeing to safety as the trade conflict between the US and China flared up, Reuters reported.

By 10:18 am GMT, spot gold climbed by 1% to $1,489.21 per ounce, after reaching $1,490.57 per ounce, the highest level seen since April 2013, while US gold futures jumped by 1.05% to $1,499.80 per ounce.

Tensions between Washington and Beijing showed no signs of abating, following US President Donald Trump’s decision to levy a 10% tariff on a further $300 billion worth of Chinese goods, ending a trade ceasefire, while China vowed to fight back against the move.

Further exacerbating the situation was a plunge of the Chinese yuan (CNY) beyond the level of CNY 7 per dollar, prompting the US Treasury Department to designate Beijing as a currency manipulator.

White House economic adviser Larry Kudlow said that the US administration is willing to resume talks with China, and is laying the groundwork to host the Chinese delegation in a round of talks slated for next September.

That said, the odds that both sides would ink a trade deal ahead of the November 2020 US presidential election were dismissed by Goldman Sachs.

In addition, Morgan Stanley warned that more retaliatory tariffs could push the global economy into a recession by middle of next year.

“Increasingly fiery rhetoric out of Washington and Beijing is fuelling worries that the conflict will amount to a longer-term headwind for global growth,” DailyFx senior currency strategist Ilya Spivak was quoted by Reuters.

Supporting the gold’s rally was a drop in the US dollar, which held close to its lowest level in two weeks reached in the prior session, with the 10-year US Treasuries hitting their lowest in around three years.

At 10:21 am GMT, the US dollar index, a gauge of the greenback against six major rivals, ticked up by 0.07% to 97.70.

On the monetary policy front, A Federal Reserve official suggested that the appropriate approach was to “wait and see” how the upcoming economic data unfolds before a decision on further rate cuts at the next meeting in September.