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Gold jumps 1% as Saudi attack lifts safe-haven bets

Mon Sep 16 2019

 

Gold prices jumped 1 per cent on Monday as an attack on Saudi Arabia's oil facilities dented risk appetite, boosting demand for the safe-haven bullion, while investors awaited for clues on monetary easing from major central bank meetings due this week.

 

Spot gold was up 1 per cent at $1,503.52 per ounce, as of 0410 GMT. Prices had dipped 1.2 per cent in the previous week on hopes that an end to the US-China trade tiff could be near. US gold futures rose 0.8 per cent to $1,511.20 per ounce.

 

The attacks on Saudi oil installations have lead to a rotation of interests out of stocks and into safe-havens, said OANDA analyst Jeffrey Halley. With escalating tensions in the Middle East and hopes of more stimulus measures from major central banks, the next target for gold will be $1,530, he added.

 

Yemen's Iran-backed Houthi rebel group claimed responsibility for the attack over the weekend on the world's biggest oil-processing facility. However, a senior US official said that evidence indicated Tehran was behind it, and President Donald Trump said the United States was “locked and loaded” for a potential response to the attack, souring its already strained relations with Iran.

 

The event hurt risk sentiment in the markets, with Asian equities trading lower at 515.4, and the safe-haven yen up 0.4 per cent to 107.64 per dollar. Against a basket of currencies, the dollar was 0.2 per cent lower at 98.053. Investors also await the outcome of the US Federal Reserve and Bank of Japan's policy meetings on Wednesday, for signals on their future policy path.

 

“Accommodative monetary policy by global central banks will support bullion's appeal for 2H 2019,” Phillip Futures analyst Benjamin Lu said in a note. Central banks globally are facing increasing pressure to dole out monetary support for flagging economies as the US-China trade dispute hurt trade and business sentiment. Lower interest rates reduce the opportunity cost of holding non-yielding bullion and weigh on the dollar.

 

Meanwhile, weighing further on risk sentiment was dismal data from China, which showed factory and consumer sectors slowed further in August, with industrial production growing at the weakest pace in 17-1/2 years, a sign of increasing weakness in an economy lashed by trade headwinds and soft domestic demand.

 

Spot gold could retest resistance at $1,524 per ounce, as it has temporarily bottomed around a support at $1,480, said Reuters technical analyst Wang Tao. Among other precious metals, silver jumped as much as 3 per cent to $18 an ounce and platinum was up 0.6 per cent to $953.78. Meanwhile, palladium rose 0.4 per cent to $1,612.50 per ounce.

 

Source: Reuters

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