Commodity Derivatives

Gold hits 2-month high as recession worries drive safe-haven demand

Gold prices rose on Monday to their highest in more than two months, with investors seeking refuge in safe-haven assets as heightened Sino-US trade tensions and Washington’s threat of tariffs on Mexico stoked worries of a global recession.

FUNDAMENTALS

Spot gold was up 0.5 per cent at $1,311.15 per ounce at 0153 GMT, after touching its highest since March 28 at $1,311.44.

The metal climbed above the key $1,316 level on Friday for the first time since April 11.

US gold futures rose 0.4 per cent to $1,314.40 an ounce.

US stock futures, Asian share markets and oil prices slipped to multi-month lows on Monday amid the mounting trade worries.

Tensions between the United States and China escalated during the weekend as the two countries clashed over trade, technology and security.

A senior Chinese official and trade negotiator said on Sunday the United States cannot use pressure to force a trade deal on China, refusing to be drawn on whether the leaders of the two countries would meet at the G20 summit to work out an agreement later this month.

Global equity funds have seen outflows of $10.3 billion in the past week as the US-China trade conflict prompted investors to take shelter in government bonds.

In a sign that Sino-US frictions are putting a big strain on the global economy, South Korea’s exports – seen as a bellwether of world growth – fell 9.4 per cent in May, worse than a median forecast for a 5.6 per cent decline, official data showed on Saturday.

The gloomy outlook has prompted traders to increase bets that the US Federal Reserve will cut interest rates sooner rather than later.

Hedge funds and money managers increased their net long positions in COMEX gold in the week to May 28, the US Commodity Futures Trading Commission (CFTC) said on Friday.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.32 per cent to 743.21 tonnes on Friday from Thursday.

The US Mint sold 4,000 ounces of American Eagle gold coins in May, down 60 per cent from the previous month, according to the latest data.

Gold premiums in top consumer China rose last week as investors bought the metal as a safe-haven, while bullion demand moderated in India as local prices jumped to two-week highs.

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