London: Gold rose to a more than six-year high on Monday, gaining more than 1%, as an escalating trade conflict between the United States and China sent investors scurrying for the safety of bullion.
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Spot gold was up 1.5% at $1,462.40 per ounce as of 1301 GMT, after hitting its highest level since May 2013 at $1,464.60. US gold futures rose 1.2% to $1,474.30.
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“This (price action) is still about the escalation of trade tension between the US and China … risk aversion is spreading in financial markets and that is something which definitely helps gold,” Julius Baer analyst Carsten Menke said.
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Fears of a slowdown in global economic growth and expectations of more rate cuts by the US Federal Reserve were also supporting bullion, he added.
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Global stocks fell for a sixth day on Monday while US.
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10-year yields dropped to a near-three-year low.
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On Friday, China said it would fight against a decision by US President Donald Trump to slap an additional 10% tariff on $300 billion worth of Chinese imports.
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The tariffs may force the US central bank to cut interest rates more than it had hoped was necessary to protect the economy from trade-policy risks.
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Lower interest rates decrease the opportunity cost of holding non-yielding bullion, and weigh on the dollar.
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“The near-term outlook for gold looks positive. All this volatility, growth fears, persistent weakness in economic data will be good enough for a risk-off environment,” said Benjamin Lu, an analyst at Phillip Futures.
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The dollar slipped to a more than one-week low against key rivals, making bullion cheaper for investors holding other currencies, but rose against the Chinese yuan.
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China let its yuan weaken below 7 per dollar on Monday, an 11-year low, while offshore yuan fell to its weakest since international trading of the Chinese currency began.
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“This might encourage some more gold buying in China as a weaker yuan means a stronger dollar, and gold provides you exposure to the dollar, which makes gold attractive for the Chinese,” Julius Baer’s Menke said.
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The Shanghai Gold Exchange said it would raise the margin requirement on its AU(T+N2) gold contract. The trading limit on the contract would also be raised.
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In India, domestic prices soared to a record, dampening demand for the metal in the world’s second-biggest gold consumer after China.
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Meanwhile, holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose to 830.76 tonnes on Friday.
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Elsewhere, silver rose 1.3% to $16.42 per ounce.
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Platinum climbed 1.8% to $857.67, while palladium gained 2.6% to $1,442.67.
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