(Kitco, Monday July 12th, 2019) – Gold prices have surged more than 17.1% so far this year, topping the 2019 return of the S&P 500 and hitting a six-year high of just over $1,500 per ounce as investors piled cash into safe-haven assets amid U.S.-China trade uncertainty and concerns that President Donald Trump could intervene in currency markets to weaken the dollar.
More protests in Hong Kong over the weekend trigged a new bid under gold and other safe-haven assets, analysts said.
Gold was trading near fresh six-year highs and holding well above the key $1,500 level early on Monday. The latest development over the weekend was Hong Kong’s airport suspending all Monday flights.
“Ongoing protests in Hong Kong are raising the specter for further economic disruptions, with the airport suspending all flights, pressuring risk assets and placing a bid under safe havens like gold,” strategists at TD Securities wrote on Monday.
At the time of wiring, December Comex gold was trading at $1,516.30, up 0.52% on the day.
Markets are now carefully watching how China deals with civil unrest, said Kitco’s senior technical analyst Jim Wyckoff.
“Safe-haven demand for the yellow metal is featured to start the trading week, as protesting in Hong Kong has escalated … This situation appears to be getting worse every weekend. Market watchers wonder how long mainland China will allow the civil unrest to go on before a crackdown,” Wyckoff said.
China is already facing heightened criticism, said BBH Global Currency Strategy global head of currency strategy Win Thin.
“The situation in Hong Kong is deteriorating … This led to heightened criticism from the mainland, with senior official saying the protestors had committed serious crime and showed signs of ‘terrorism.’ The Hong Kong economy is already suffering from the US-China trade war, and these ongoing protests will only make things worse,” the strategist wrote.
INTL FCStone highlighted last week that if the Hong Kong situation deteriorates gold could hit $1,600 an ounce.
“We have an outside chance of prices getting to $1,600 this month, but predicated this on perhaps China moving aggressively against protestors in Hong Kong, something that looks like an increasing possibility given the chaos that has engulfed the island,” INTL FCStone Independent Commodity Consultant Edward Meir said in an August report.
The negative-yielding debt also continues to support gold this week, added TD Securities. “The market cap of global negative-yielding debt jumped to $15.5 trillion, rising roughly 80% [from last year]. USD/JPY has collapsed in kind and now looks within striking distance of the flash-crash lows around 104.90. The USD benefits too,” TD Securities global head of FX strategy Mark McCormick said.
Risk markets are losing bid at the moment, which points to “re-calibration of positioning,” McCormick wrote.
“One of the major concerns now lies in the fact that global equity positioning runs at multi-year highs as global growth concerns linger. The rise in geopolitical stress and elevated uncertainty jeopardizes the muddle along scenario, especially if China tries to export deflation,” McCormick wrote. “The result has been a surge in demand for perceived safe-havens like gold, JPY, and CHF.”
Posted by :
Jack Dempsey, President
401 Gold Consultants LLC
jdemp2003@gmail.com