BENGALURU. — Gold climbed to a near one-month high yesterday as the dollar weakened after the United States and China agreed during the G20 summit in Argentina to a temporary truce in their trade war. Spot gold rose 0,7 percent to $1,230.81 per ounce at 1015 GMT, having touched its highest level since November 7 at $1,232.22 earlier in the session.
US gold futures gained 0,9 percent to $1,236.50 per ounce. “The appeal of US dollar as a safe haven is softening and that leads to a rising gold price,” said Julius Baer analyst Carsten Menke.
“This is very much as expected under the assumption that there was some sort of a positive development at the G20 meeting in terms of the trade tensions between the US and China.”
Washington and Beijing agreed to halt additional tariffs in a deal that keeps their trade war from escalating as the two sides try again to resolve their differences with new talks aimed at reaching an agreement within 90 days. This weighed on the dollar index, which measures the greenback against a basket of six major currencies, making gold cheaper for holders of other currencies.
“Bullion is likely to get a further boost if prices manage to stand firmly above $1,230 and particularly if they surpass $1,235,” ActivTrades chief analyst Carlo Alberto De Casa wrote in a note.
“In this case, there could be space for further rallies, with a first target at $1,260 and a more ambitious one at $1,300. A climb would become more likely if the US Federal Reserve reduces the number of rate hikes in 2019/2020.”
Gold tends to gain when rate hike expectations recede because lower rates reduce the opportunity cost of holding non-yielding bullion and weigh on the dollar. The US currency was the preferred safe haven this year as the US-China trade war unfolded against a backdrop of higher US interest rates, denting bullion’s appeal. In the week to November 27, speculators increased their net short position in gold by 8,464 contracts to 51,828 contracts, the US Commodity Futures Trading Commission (CFTC) said on Friday.