By Barani Krishnan
Investing.com - The bull run in gold showed little signs of slowing on Wednesday as a fresh dive in U.S. Treasury yields to three-year lows sent investors scrambling for safe havens.
Spot gold, reflective of trades in bullion, traded at $1,554.03 per ounce by 2:50 PM ET (18:50 GMT), up $6.37, or 0.x4%, on the day. Bullion earlier peaked at $1,557.09, its highest since April 2013.
Gold futures for December delivery settled up $4.50, or 0.3%, at $1,560.40 per ounce on the Comex division of the New York Mercantile Exchange. December gold earlier raced to a more than six-year high of $1,566.20.
U.S. Treasury yields fell as the benchmark 10-year yield closed at 1.459%, its lowest level since July 2016. Yields have been falling this week after U.S. manufacturing data showed the first contraction since 2016 on worries about a weakening global economy and U.S.-China trade tensions.
Gold also attracted bids after U.S. President Donald Trump threatened on Tuesday to be “tougher” on Beijing if the trade fight dragged on into his second term as president. Trump needs to be re-elected in November 2020 to fulfill the threat.
Gold is already up more than 20% this year, but the rally in the yellow metal is still going strong, fed by fears over how bad the trade war will get, political uncertainty in the United Kingdom and Europe, and the potential for a world-wide recession. And there’s plenty of scope for gold to rally further from the potential for more dismal global data.
Gold needs to rise about 25% more in order to rewrite record highs above $1,900 set in 2011. With four months before the year comes to a close, there’s little probability that it will rise that much. Yet, some gold longs are betting that this will be a phenomenal year for the cherished safe haven - meaning anything is possible.
As risk assets took a beating and global central banks confirmed a shift to looser monetary policy in August, inflows in gold ETFs rose 101.9 tons, hitting the highest level since February 2013.
That third-consecutive-month surge brought total assets to 2,453.4 tons as of Friday, after the addition of an aggregated 154.1 tons in June and July.
Markets, meanwhile, are pricing in an additional 25-basis-point cut in rates at the Federal Reserve’s next policy decision meeting, scheduled for Sept. 17-18. Lower interest rates tend to support gold by reducing the yield on bonds, which compete for the capital of risk-averse investors.
Central banks across a group of 37 developing economies showed a net 14 rate cuts last month, the highest number since policymakers' hefty stimulus measures that followed the 2008 financial crisis, Reuters reported.
But some analysts said gold could see consolidation in the near-term.
“Considering that positioning is aggressively skewed long, fewer event risks could see gold consolidate ahead of the various central bank meetings in September, despite its still-attractive luster,” analysts at TD Securities said in a note.