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Gold rebounds on heightened US-China tensions

August 3, 2022By Reuters

Aug 3 (Reuters) – Gold prices rose on Wednesday drawing on support from escalating tensions between Beijing and Washington, although firmer US Treasury yields capped gains in the non-yielding asset and held it below a one-month high hit in the last session.

Spot gold rose 0.3% to USD 1,765.68 per ounce by 0839 GMT. On Tuesday, bullion rose to its highest since July 5, hitting USD 1,787.79 before closing down 0.6% on the day to break a four-session winning streak.

US gold futures fell 0.4% to USD 1,782.90.

“Apart from heightened geopolitical tensions caused by Pelosi’s Taiwan visit, the fact that gold is able to shrug off rising bond yields today is a positive sign,” said Commerzbank analyst Carsten Fritsch.

China condemned House of Representatives Speaker Nancy Pelosi’s trip, the highest-level US visit to Taiwan in 25 years, and responded with a flurry of military exercises, summoning the US ambassador in Beijing, and announcing the suspension of several agricultural imports from Taiwan.

Rupert Rowling, market analyst, at Kinesis Money, however, expected the impact of the tensions to be short-lived.

“Market focus will return to interest rates and the negative long-term impact that is likely to have on gold.”

A trio of Fed policymakers signaled on Tuesday that more rate hikes are coming in the near term, which has lifted benchmark US 10-year Treasury yields and taken some shine off gold.

In this environment of ever-rising interest rates, gold’s appeal diminishes due to its lack of yield, Rowling said, noting that the Bank of England was expected to raise its benchmark rate by 50 basis points on Thursday.

Among other precious metals, spot silver fell 0.3% to USD 19.89 per ounce, while palladium rose 0.3% to USD 2,069.70.

Platinum eased 0.1% to USD 892.94.

(Reporting by Arundhati Sarkar in Bengaluru; Editing by Tomasz Janowski)


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