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Gold Enjoys Modest Gains Amid US-China Tensions, Stimulus

August 10, 2020 at 16:43 by Andrew Moran

Gold futures are enjoying modest gains to kick off the trading week, buoyed by renewed US-China tensions and inevitable stimulus coming from Congress. The yellow metal has been on a tear over the last month, skyrocketing to an all-time high. Gold did pare some of its rally in intraday trading, but it is still looking to test $2,100 this month.

December gold futures tacked on $17.10, or 0.84%, to $2,045.10 per ounce at 16:10 GMT on Monday on the Comex division of the New York Mercantile Exchange. The yellow metal surged more than 2% last week, and it is now trading up more than 34.5% year-to-date. As gold prices flirt with an intraday high of about $2,084, the next level to test will be $2,100.

Silver, the sister commodity to gold, topped $29 to start the trading week. September silver futures rallied $1.515, or 5.5%, to $29.055 per ounce. The white metal recorded a 15% weekly gain last week, despite the breather on Friday. So far this year, silver prices have skyrocketed 62.3%.

Metal commodities have been surging on a weaker greenback as the US dollar plunges on inflation fears and confidence in the broader financial markets. But the buck is edging up slightly on Monday. The US Dollar Index, which measures the greenback against a basket of currencies, rose 0.05% to 93.48, from an opening of 93.39. A stronger buck is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase.

Investors are looking at gold as a safe-haven play, too, amid geopolitical tensions between the world’s two largest economies. Over the weekend, China slapped fresh sanctions on several US officials, including Senator Ted Cruz (R-TX) and Senator Marco Rubio (R-FL). There are concerns that relations between Beijing and Washington would only worsen, which could threaten trade. However, the government did confirm that it will adhere to the provisions within phase one of the trade agreement. Also, later this week, officials from both countries will host a video conference.

Overall, investors are bullish on gold over inflation fears as governments and central banks attempt to rescue the economy in the aftermath of the coronavirus pandemic. The US government is now determining whether to spend $1 trillion or $3 trillion as part of its next round of stimulus and relief efforts, something that would further depress the dollar.

The Federal Reserve also intends to raise its inflation target beyond the 2% range and keep interest rates at historic lows, which would be a boon for precious metals.

In other metal markets, September copper futures surged $0.0745, or 2.67%, to $2.867 per pound. September platinum futures advanced $47.10, or 4.85%, to $1,017.50 an ounce. September palladium futures rallied $152.90, or 7.02%, to $2,329.50 per ounce.

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