Gold rebounds as U.S.-China tensions boost safe-haven appeal

  • Expect impact of U.S.-China tensions to be short-lived – analyst
  • Fed officials walk back dovish Powell comments post-FOMC
  • BoE rate hike decision on Aug. 4 in focus

Aug 3 (Reuters) – Gold prices advanced on Wednesday as the dollar fell and U.S.-China tensions rose, although firmer U.S. Treasury yields capped gains in the non-yielding asset to hold it below a one-month high hit in the last session.

Spot gold rose 0.4% to $1,767.41 per ounce by 1223 GMT, after hitting its highest since July 5 on Tuesday at $1,787.79 before closing down 0.6% to break a four-session winning streak.

U.S. gold futures fell 0.5% to $1,780.50.

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“Nancy Pelosi’s visit to Taiwan hasn’t triggered a substantial reaction from Beijing (but) the situation remains tense and is supportive of gold due to its safe-haven status,” said Ricardo Evangelista, senior analyst at ActivTrades.

At the same time, the U.S. dollar started easing, pushing the price of gold higher, Evangelista added.

A softer dollar makes gold attractive for overseas buyers.

China condemned House of Representatives Speaker Pelosi’s trip, the highest-level U.S. visit to Taiwan in 25 years, and responded with a flurry of military exercises, summoning the U.S. ambassador in Beijing, and announcing the suspension of several agricultural imports from Taiwan. read more

Rupert Rowling, market analyst at Kinesis Money, however, expected the impact of the tensions to be short-lived. “Market focus will return to interest rates and the negative long-term impact that is likely to have on gold,” he said.

A trio of Fed policymakers signalled on Tuesday that more rate hikes were likely in the near term, which lifted benchmark U.S. 10-year Treasury yields and took some of the shine off gold. read more

In an environment of rising interest rates, gold’s appeal diminishes due to its lack of yield, Rowling said, noting the Bank of England was expected to raise its benchmark rate by 50 basis points on Thursday.

Among other precious metals, spot silver rose 0.5% to $20.06, while platinum eased 0.2% to $892.55.

Palladium slipped 1.7% to $2,026.67.

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Reporting by Arundhati Sarkar in Bengaluru; Editing by Tomasz Janowski, David Holmes and Vinay Dwivedi

Our Standards: The Thomson Reuters Trust Principles.

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