Gold futures could continue to climb higher amid rising US-China tensions
Gold futures may be down on Tuesday, but with tensions rising once again between the world’s two largest economies the price of the precious metal is trending higher and could see significant gains throughout 2020.
Gold futures are down a touch on Tuesday, but with US-China tensions rising amid the Covid-19 pandemic the price of the precious metal is trending higher and could see significant gains over the coming months.
Gold futures June contract is down a little over 1% at $1707.25 at the time of publication, with the spot price trading at $1713.65 per ounce.
US-China tensions heat up again
Rising tensions between the world’s two largest economies is driving precious metals higher, but also oil too, with Brent crude surging above $35 a barrel, up from $22 at the end of April.
The prospect of an all-out trade war between China and the US began to look increasingly likely over the weekend, after China’s foreign minister, Wang Yi, accused officials in Washington of pushing the two countries towards a ‘new cold war’.
‘China has no intention to change, still less replace the United States,’ Yi said on Sunday. ‘It’s time for the United States to give up its wishful thinking of changing China and stopping 1.4 billion people in their historic march toward modernisation.’
Beijing’s wider relationship with western economies is also coming under increased strain, with the UK government interested in implementing tighter rules to protect weakened British businesses from Chinese takeovers.
Over the weekend, the UK government also announced an emergency review of its deal with Chinese telecoms company, Huawei, which is contracted to build and expand Britain’s 5G networks.
‘Following the US announcement of additional sanctions against Huawei, the NCSC is looking carefully at any impact they could have to the UK’s networks,’ a government spokesperson said.
Gold could hit new highs, says Citi
The upside of a world reeling from the Covid-19 pandemic is that safe haven assets like gold are likely to surge in the coming months as investors shift away from riskier assets like equities.
Bullish sentiment among investors continues to build amid the pandemic, with commodity analysts from Citi believing the precious metal could hit all-time highs by 2021.
‘We think prices are more likely to make a slow grind higher, but generally hold a $1,600-1,700 handle, rather than quickly spike to the $1,850-1,950 area,’ Citi analysts said in a note last week.
In fact, the US-based investment bank said that it sees gold prices pushing as high as $2000 an ounce over the medium term, with demand for the commodity likely to continue to rise amid the macroeconomic and low interest rate environment.
How to trade commodities with IG
Create an IG trading account or log in to your existing account
Enter ‘Gold Spot’ in the search bar and select it
Choose your position size
Click on ‘buy’ or ‘sell’ in the deal ticket
Confirm the trade
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Speculate on commodities
Trade commodity futures, as well as 27 commodity markets with no fixed expiries.1
- Wide range of popular and niche metals, energies and softs
- Spreads from 0.3 pts on Spot Gold, 2 pts on Spot Silver and 2.8 pts on Oil
- View continuous charting, backdated for up to five years
Live prices on most popular markets