Metals

Gold breaks $1,900 per ounce barrier as Sino-US row drives flight to safety

A one kilo Swiss gold bar and US dollars gold coins are pictured in Paris on February 20, 2020.
JOEL SAGET | AFP | Getty Images

Safe haven gold pierced the $1,900 per ounce ceiling on Friday for the first time since 2011 as a worsening U.S.-China row added to fears over the hit to a global economy already reeling from the coronavirus pandemic.

Spot gold climbed 0.9% to $1,902.99 per ounce, having earlier hit its highest since September 2011 at $$1,905.99.

U.S. gold futures rose 0.6% to $1,901.00 per ounce.

"Concerns about more global economic slowing due to the increasingly acerbic U.S.-China spat is seen as likely to keep global government and monetary support going even longer," said Tai Wong, head of base and precious metals derivatives trading at BMO.

In yet another escalation, China ordered the United States to close its consulate in the city of Chengdu, responding to a U.S. demand for China to close its Houston consulate.

This hammered risk sentiment and sent the dollar index to a two-year trough.

Further bolstering bullion's appeal was the constant surge in COVID-19 cases, with the U.S. tally crossing over 4 million on Thursday and global cases breaching 15.58 million.

If the economy does not show "quality signs" of improving, gold could clear $1,922 and continue towards $2,000, said independent analyst Ross Norman.

Non-yielding gold has surged 24% this year, underpinned by low interest rates and stimulus from central banks, which benefits bullion since it is a perceived hedge against inflation and currency debasement.

However, Commerzbank analysts said the rise in gold and silver had happened "possibly too quickly," adding in a note that this entailed "the risk of a setback, especially as gold and silver are being driven almost exclusively by extremely strong investment demand".

Silver rose 0.3% to $22.79 per ounce, and was up over 18% for the week, its best since 1987, bolstered by hopes for a revival in industrial activity.

Platinum rose 2% to $923.34 and palladium climbed 3.7% to $2,205.49.