Safe-Haven Demand Gives Gold a Boost As the Weekend Looms

If you read our mid-week update on Wednesday, you’ll have noted that Wall Street was displaying an increase of risk-appetite as the first green shoots of economic recovery started to break through the coronavirus gloom. Just two days later, we are now seeing that risk appetite has abated somewhat in the latter part of the week, with safe-haven demand taking the reins and giving gold a boost.

Oanda analyst, Ed Moya predicted that the precious metal would see a resurgence in safe-haven demand earlier this week as we reported, saying “[there has been]…good news on the virus front, reopening momentum, and roaring Nasdaq. For gold, risk appetite needs to wane a little… Gold needs financial markets to become frustrated again and that should not take long to happen.”

The frustrations came sooner than expected with new US-China tensions causing Wall Street to see its gains fading away in the very last hour of Thursday trading. The Financial Times reports that there is an overall feeling of optimism in the markets, with some achieving three month highs – European markets for example appear to be rebounding with Morgan Stanley economist Jacob Nell saying recent performance “… increases the chance of a synchronised recovery across Europe next year.”

The optimism was lost somewhat on Wall Street however with President Trump indicating he would be hosting a news conference today (Friday) to address moves by China to introduce a controversial national security law in Hong Kong. ING’s head of Asia-Pacific research Robert Carnell says this could signify a reopening of the trade war arguments. He described it as a “gloves-off restart of US political tensions towards China which will probably see trade tensions worsen and tit-for-tat retaliation commence.” This strongly favours gold and further price gains if the resounding speed of the gold bull run we saw during last year’s trade war discussions is taken as a yardstick.

The prospect of exactly that has already given gold an end-of-week boost with safe-haven demand incited by the US administration’s remarks pushing gold up by $6 yesterday (Thursday) to $1,732.80. If you missed out on buying gold during the 2019 trade war, act quickly to secure your investment.

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