Intensifying US-China trade war pushes gold futures to record high

After China and the US fired fresh salvos at each other in the ongoing trade war on Friday, gold futures climbed to lifetime highs, as investors retreated to the safe haven provided by the precious metal.

On the Multi Commodity Exchange, gold futures for delivery in October gained 1.69 per cent on Friday to trade at an all-time high of Rs 38,810 per 10 grams. Gold futures on the Comex jumped by $30 to trade on Friday at $1,536.40 an oz.

US President Donald Trump on Friday tweeted, indicating trillions of dollars of loss in trade with China and asked US companies to look for other markets. Beijing unveiled a new round of retaliatory tariffs on about $75 billion worth of US goods beginning next month. The intensifying trade war has created a mood of uncertainty.

In India, the rise in gold prices as well as the depreciation in the rupee value has pushed its prices to new highs.

In the spot Zaveri Bazaar in Mumbai, pure gold prices jumped to trade at Rs 38,800 on bills that included the goods and services tax of 3 per cent on Saturday.

“The dollar nosedived on Friday. Certainly, the fundamentals are very strong for the yellow metal,” said Naveen Mathur, director, Anand Rathi Share and Stock Brokers.

“Fundamentals are very strong for gold with heightened trade tensions between the US and China. We estimate gold price to hit $1,630 an oz in the international market, translating thereby to Rs 42,000 per 10 grams in the Indian market in the medium term,” said Kishore Narne, associate director, Motilal Oswal Financial Services.

Since the Union Budget, gold has become costlier by 8-9 per cent because of a 2.5 per cent increase in import duty to 12.5 per cent and about a 5 per cent depreciation in the rupee.

In such an environment, buyers are abstaining from purchasing the precious metal and jewelers are banking on small businesses.

“There is no order for fresh gold. Customers prefer to wait and watch. We are surviving with the little quantity of old jewellery transactions,” said Kumar Jain, director, Umedmal Tilokchand Zaveri, a jewellery retailer in Zaveri Bazaar.

According to Narne, the retail demand has now been replaced with central bank demand globally, which keeps gold prices elevated.