Gold hits six year high and eyes $1,500 as trade tensions between the U.S. and China intensify and unrest in Hong Kong continues. The yellow metal’s safe haven glow shone brightly sending gold futures ever higher. Currently, the December Comex Contract is up $14.00 an ounce at 1,471.50.
Gold gained strength as a hedge against uncertainty as Asian stocks headed for their biggest selloff since October and the yuan fell past 7 per dollar, a level that investors had considered a line in the sand for China’s policy makers. The dollar tumbled against the yen. U.S. stocks are set to open solidly lower when the New York day session begins shortly.
The Chinese government has asked its state-owned enterprises to suspend imports of U.S. agricultural products after President Donald Trump ratcheted up trade tensions with the Asian nation last week, Bloomberg reported early Monday, citing people familiar with the situation. On Thursday, Trump said that the U.S. will levy a 10% tariff on $300 billion in Chinese goods starting Sept. 1.
The U.S.-China trade standoff, speculation on rate cuts by the U.S. Federal Reserve and other central banks, economic uncertainty and geopolitical tensions sent gold to a six-year high above $1,400 an ounce in July, and it’s continued to climb since.
December gold futures, the most active contract on Comex, increased 2.7% last week to settle at $1,457.50. Hedge funds and money managers raised their bullish stance in Comex gold and silver contracts in the week to July 30, the U.S. Commodity Futures Trading Commission said Friday.
Meanwhile, SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 0.36% to 830.76 metric tons on Friday from 827.82 metric tons on Thursday, Reuters reported.
Silver futures slid 0.8% last week on Comex, with the September contract settling at $16.27 an ounce. The contract rallied early Monday and is currently selling at $16.515, up $0.245. Spot palladium slid 8.1% last week and touched a seven-week low. It closed Friday at $1,409.28, but has strongly rallied this morning currently at $1,442.50, up $24.80. Spot platinum decreased 2.4% last week and is currently at $860.80.
In economic news, China’s services sector expanded at the slowest pace in five months in July despite a sharp upturn of new export orders, Reuters reported. The Caixin/Markit services purchasing managers’ index slipped to 51.6, the lowest reading since February, from June’s 52.0. Figures over 50 indicate growth and below 50 indicate contraction. The overall service index has shown expansion every month since it was started in 2005, Reuters reported. The U.S. ISM nonmanufacturing index comes out later Monday.
Five Asian central banks have rate decisions this week, including India, Australia and New Zealand. And expectations are growing that the Fed will follow its July 31 rate cut with a second one in September. The CME FedWatch Tool put the odds of a September 18th rate cut at 100% early Monday, compared with 67.5% a week earlier. The tool put the probability of a 25-basis-point reduction at 85.8% and the likelihood of a 50-basis-point cut at 14.2%.
Disclaimer: This editorial has been prepared by Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.