Global Investors Bet on Gold Strength as Global Volatility Concerns Grow

Entering the first week of September, gold prices held steady the day after Labor Day as US-China trade relations continue to escalate, paralleled by other anxieties linked with Britain’s choice to leave the European Union.  Even with all this uncertainty, the greenback continues to hold strong; backed, of course, by gold. 

That in mind, spot gold was up 0.1 percent at $1,532.48 per ounce to open the final quarter of the year.  This is not too far off from its six-year (plus) high of $1,554.56.  More importantly, perhaps, US gold futures grew 0.8 percent, to $1,541.40. 

To put this in another perspective, the US dollar elevated to a more than two-year high against other major currencies. This has resulted in gold becoming more pricey for investors with holdings in other international currencies. 

On the other side of this—the trade front—China lodged a complaint, last week, at the World Trade Organization in regards to US import duties. This move trashed the US’ most recent tariff actions as a direct violation of the previous consensus reached by leaders from both countries during the latest meeting, in Osaka, Japan.

The weight of this rising tension may have to wait a few days, however, as lawmakers in Britain are still deciding whether or not to block Prime Minister Boris Johnson from his pursuit of a no-deal Brexit.  This would make or break, of course, the first stage of their plan, which involves a snap election.  

Now, analysts note that fears of global deceleration, coupled with negative yielding debts around the globe support a healthy gold market. Hopes for interest rate cuts by central banks across the world also buoy strength on gold futures. At present, federal fund futures appear to hint at a 91 percent chance the US Federal Reserve will, in fact, issue a 25-basis point rate cut by the end of this month. 

In other commodities, silver was up 0.2 percent—to $18.48 per ounce—with platinum jumping nearly 1 percent, to $938.34 per ounce. Even palladium is up: 0.3 percent to $1,535.79. 

All this in mind we will have to wait and see what the week brings, as US economic data is set for release on Tuesday, which includes data on the US manufacturing purchasing managers’ index (PMI), the global manufacturing PMI, the IDB/TIPP economic optimism index, the ISM manufacturing report on business, and constructing spending.