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Gold Hits One-Month High on US-China Tensions, Bleak Data

May 15, 2020 at 18:54 by Andrew Moran

Gold futures are trading at their best levels in one month, buoyed by rising trade tensions between the world’s two largest economies and disappointing US economic data. If these trends persist, could the yellow metal test $1,800 next week? With the war of words escalating in Washington and Beijing, the odds of gold prices advancing to a record high are increasing.

June gold futures advanced $11.10, or 0.64%, to $1,752.00 per ounce at 18:39 GMT on Friday on the Comex division of the New York Mercantile Exchange. This is the best level in a month. Gold settled the week up just under 3%, lifting its year-to-date gain to more than 15%.

Silver, the sister commodity to gold, is recording a monster rally to close out the trading week. July silver futures surged $0.904, or 5.6%, to $17.06 an ounce. The white metal will finish the week 8.3% higher, paring its 2020 decline to below 5%.

The metals market is rising on bearish economic data that might prove the state of the US economy could be worse than what the experts are anticipating.

Last month, retail sales crashed 16.4%, worse than the median estimate of 12%. Industrial output plummeted 12.% in April, while manufacturing production cratered 13.7%. These readings were all the largest on record. Capacity utilization also slumped to 64.9%.

In addition to the bleak data, investors are nervous about a renewed US-China trade war. President Donald Trump continues to suggest that the US could cut ties with Beijing, whether this involves steep tariffs or border restrictions remains to be seen. His administration is telling the media that the phase-one agreement will not be impacted by the public health crisis or friction between the two sides.

Meanwhile, incredible monetary and fiscal stimulus by the US and other countries has enhanced gold’s positive sentiment. This week, the Federal Reserve’s balance sheet grew to just under $7 trillion, driven by greater acquisitions in mortgage-backed securities and Treasurys. Next week, the central bank will unveil just how much corporate bond exchange-traded funds (ETFs) it purchased in recent days. With debt monetization and potentially negative interest rates, the state of monetary policy is a boon for metal commodities.

Optimism over economies reopening this month has placed a ceiling on gold’s ascent. At the same time, analysts fear that hitting the restart button too soon might trigger a second wave and impose dire economic costs on the country.

In other metal markets, June copper futures shed $0.0105, or 0.45%, to $2.3355 per pound. June platinum futures picked up $41.90, or 5.41%, to $816.90 an ounce. June palladium futures spiked $65.00, or 3.61%, to $1,863.20 per ounce.

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