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Gold gets driven toward $1 600 as oldest haven shows its mettle

Escalating trade war boosts demand for safe haven assets.

Gold took a stride toward $1 600 an ounce as the US-China trade war worsened, hurting the outlook for global growth and boosting demand for the traditional haven as risk assets suffered.

Bullion futures rallied as much as 1.8% to $1 565 an ounce on the Comex, the highest since 2013. Silver was also favoured, with spot prices up as much as 2.1%. The advances in the week’s opening session followed gains on Friday.

Gold is showing its mettle once again as a store of value during times of crisis, surging more than 20% this year as Washington and Beijing have squared off. The two sides traded fresh blows on Friday, and over the weekend, President Donald Trump kept up his hard line. The fight is hurting economic growth, boosting the likelihood of additional US rate cuts from the Federal Reserve.

As most raw materials fell, precious metals are “the standout sector, as gold prices rallied,” Australia & New Zealand Banking Group said in note.

Fed policy makers have made the case that trade disputes are poisoning the global economy and making their job more difficult. On Monday, the US 10-year cash yield sank to 1.4695%, the lowest level since August 2016.

With futures 1% higher at $1 553.30 at 10:35 a.m. in Singapore, miners’ shares surged. In Sydney, Newcrest Mining rallied as much as 6.7%.

As gold’s rally has gathered pace, investors have pushed into bullion-backed exchange-traded funds, which have hit the highest since 2013. Holdings are set for a third monthly climb, according to data compiled by Bloomberg.

Gold “should continue to soar” as investors seek havens from trade tensions and further Fed easing, said Helen Lau, an analyst at Argonaut Securities Asia. “Meanwhile, currency depreciation should lead to more diversification away from risk assets in general into gold or gold-related stocks.”

© 2019 Bloomberg L.P.

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