Gold Hits Four-Week High as Pelosi’s Taiwan Trip Stirs Tensions

(Bloomberg) — Gold rose to the highest level since early July as investors braced for a stormy period in US-China relations with House Speaker Nancy Pelosi heading for Taiwan.

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The precious metal often benefits from bouts of geopolitical turbulence, and the Pelosi trip only adds to tailwinds that have helped gold rebound from a 15-month low. Growing fears about the global economy have also aided bullion’s rise to a four-week high.

Pelosi is expected to arrive later Tuesday in Taiwan, which China views as its territory. She would be the most senior US politician to visit the island in a quarter of a century, and Beijing has warned of consequences including military action if the trip goes ahead.

Helping bullion’s recovery could also be an end to outflows from gold-backed ETFs after 21 days of uninterrupted withdrawals, according to Commerzbank AG analyst Carsten Fritsch. While ETF holdings were reduced by 94 tons in July, the biggest outflow seen in any month since March last year, investors’ sentiment may be shifting, he added.

“Recently there were three consecutive days of inflows, which could point to a shift in sentiment among ETF investors,” Fritsch said in a note.

While the precious metal may have been buoyed by rising US-China tensions, it is “flashing overbought on at least one technical indicator and may face profit-taking pressure after rising to multi-week highs,” said Gnanasekar Thiagarajan, director at Commtrendz Risk Management Services.

Spot gold rose as much as 0.5% to $1,780.53 an ounce, before trading at $1,777.21 by 12:16 p.m. in London. The Bloomberg Dollar Spot Index rose 0.2%. Silver and platinum edged higher while palladium declined.

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