Gold prices rise as simmering US-China tensions over Hong Kong boost demand; ETF holdings reach fresh high

Gold rebounded on Thursday as deteriorating US-China relations over Beijing’s move to impose a national-security law in Hong Kong fanned concerns over quick economic recovery and drove investors towards safe-haven metal. Spot gold was up 0.6 percent at $1,719.08 per ounce, recovering from a two-week low of $1,693.22 touched in the previous session. US gold futures rose 0.5 percent to $1,718.60. “The tensions between US and China continue to be rather on the high side. Overall, the market is a bit worried about the situation geopolitically and also economically,” said Afshin Nabavi, senior vice president at precious metals trader MKS SA. China’s parliament approved a national security legislation for Hong Kong on Thursday, fuelling fears that could jeopardise its special autonomy and freedoms. The new security law on Hong Kong has lead to an escalation in trade tension between the United States and China amid Washington ramping up criticism of China over the origins of the coronavirus pandemic. The escalating tensions have increased interest in gold, which is seen as a safe investment during times of political and financial uncertainty. Reflecting sentiment, SPDR Gold Trust holdings, the world’s largest gold-backed exchange-traded fund, rose 0.2 percent to 1,119.05 tonnes on Wednesday, a seven year high. “ETF holdings are reaching fresh highs, and we expect investment demand to outweigh the weaker physical offtake in Asian markets. We still see risks skewed to the upside,” ANZ said in a note. Providing additional support to the metal was fresh stimulus boost, after Japan approved a fresh $1.1 trillion package, while the European Union unveiled one of 750 billion euros. Investors now await initial U.S. jobless claims data due at 1230 GMT. Elsewhere, palladium fell 0.4 percent to $1,928.32 per ounce, while platinum rose 1.1 percent to $827.70 and silver was steady at $17.30.