Gold rose to a one-week high on Wednesday, holding comfortably above the key $1,800 level, on safe-haven demand fuelled by concerns over brewing U.S.-China tensions and their impact on a global economy already reeling from the COVID-19 pandemic.
Spot gold was up 0.1% to $1,809.61 per ounce, having hit its highest since July 9 at $1,814.40. U.S. gold futures were steady at $1,813.10.
“The worsening U.S.-China relations are leading to investment demand in gold,” said Jigar Trivedi, commodities analyst at Mumbai broker Anand Rathi Shares, adding the tensions were raising concerns an economic recovery may take longer than expected.
However, gold could see a short-term correction on hopes for a possible COVID-19 vaccine, Trivedi said.
U.S. President Donald Trump signed an executive order ending preferential treatment for Hong Kong, to which China responded by saying it would impose retaliatory sanctions on the United States.
Trump also shut the door on “Phase 2” trade negotiations with Beijing.
Adding to the heightened risks, Federal Reserve officials warned on Tuesday the U.S. economy would recover more slowly than expected.
Injecting further fuel to gold’s rise, the dollar fell 0.3% versus a basket of currencies.
Safe-haven buying helped gold maintain its positive trajectory despite gains in stock markets driven by optimism surrounding an experimental vaccine for COVID-19 produced by U.S. company Moderna.
“As long as prices remain above the $1,800 level, gold has the potential to test $1,815 and a fresh multi-year high at $1,825, respectively,”FXTM analyst Lukman Otunuga said in a note.
“Should $1,800 prove to be unreliable support, the precious metal may experience a technical correction back towards the $1,765-$1,780 region before bulls gather fresh momentum.”
Reflecting appeal for gold, holdings of the SPDR Gold Trust exchange-traded fund were near their highest since April 2013.
Elsewhere, palladium rose 0.2% to $1,963.01 per ounce, platinum was 0.4% higher at $828.99 and silver gained 0.7% to $19.21.