Gold Surges to Record High Amidst Trade War Jitters, Market Tightness
Gold commenced Wednesday with a surge, hitting a new record high as concerns over escalating trade tensions spurred demand for safe-haven assets.
Key Factors Fueling Gold Rally:
* Ongoing trade war worries, particularly between the US and China
* Potential monetary policy implications if tariffs re-ignite inflation
* Increased demand from major dealers, shifting metal to the US ahead of potential tariffs
Market Tightness Indicators:
* London lease rates soar to 4.7%, reflecting demand for physical gold
* Bloomberg reports lengthy queues for bullion withdrawals from the Bank of England
* Inflows into Comex exchange depositories in New York add to market tightness
Analysis:
The shortage of physical gold is attributed to the mismatch between 400-ounce bars traded in London and the 100-ounce or kilobar requirements for Comex deliveries. However, refineries in Switzerland and elsewhere could potentially alleviate the issue.
Rhona O'Connell, head of market analysis at StoneX Group, suggests that authorities could intervene by lending out gold if the situation becomes severe. The official sector may inject liquidity to prevent a disorderly gold market.
Currency Impact:
The weakening US dollar makes gold more attractive for buyers globally.
Market Performance:
As of 12:32 p.m. in London, spot gold surged 1% to $2,870.09 per ounce. The Bloomberg Dollar Spot Index declined by 0.3%. Silver, platinum, and palladium also witnessed gains.