Gold’s ‘good week’ gets better as trade war triggers safe haven buying
Investor interest in bullion is regaining momentum as the trade fight stokes concerns global growth will slow, hurting risk assets including equities and industrial commodities such as steel.business Updated: Mar 23, 2018 12:45 IST
Gold’s getting a double boost this week, as investors pile into the traditional haven as a long-awaited trade war finally erupted between the US and China, extending gains that came after the Federal Reserve’s policy outlook proved less hawkish than feared.
Bullion for immediate delivery rallied as much as 0.8% to $1,339.16 an ounce, the highest since March 7, and was at $1,338.39 at 1.05 pm in Singapore. Gold’s up 1.8% this week, heading for the biggest gain since the period to Feb 16. It surged 1.6% on Wednesday after the Fed signaled the pace of tightening won’t accelerate this year.
Investor interest in bullion is regaining momentum as the trade fight stokes concerns global growth will slow, hurting risk assets including equities and industrial commodities such as steel. On Friday, a few hours after President Donald Trump instructed Trade Representative Robert Lighthizer to impose levies on at least $50 billion in Chinese imports, the Asian country’s Commerce Ministry announced plans for reciprocal tariffs.
“It’s been a good week for precious metal bulls, with multiple factors supporting the yellow metal,” said Jordan Eliseo, chief economist at Australian Bullion Co. “As it often does, gold rallied after the Fed pushed through with their anticipated rate hike, whilst the troubling rhetoric around tariffs, and the sharp sell off in risk assets, is also providing some safe-haven demand.”
The Bloomberg Dollar Spot Index fell 0.6% this week, while equity markets in the US and Asia tumbled after the tariffs were announced. While there’d been concern among some investors the Fed may favor four hikes in 2018, the bank’s guidance signaled policy makers are still sticking at three.
There are other signs that gold is being favored again. Holdings in exchange-traded funds backed by bullion have expanded to the highest level since 2013, while traders and analysts in a Bloomberg survey are the most bullish on the metal’s outlook in almost two months.