Monday 27 July 2020 7:15 am

Gold hits all time high amid US-China tensions

Gold hit an all-time high today as growing tensions between the US and China sent investors scrambling for safe haven assets.

Gold rose one per cent to fresh heights of $1,920.9 per ounce, beating a record last set in September 2011. 

Washington last week ordered China’s consulate in Houston to close, prompting Beijing to respond by closing the US consulate in Chengdu. The spat sent global shares down while investors flocked to safe haven assets, especially those not tied to any specific country.

MSCI’s ex-Japan Asia-Pacific index rose 1.3 per cent as Taiwan’s TSMC, Asia’s third-largest company by market capitalisation, rose almost 10 per cent. 

The sharp hike boosted other tech stocks in the region and came after rival Intel signalled it may give up manufacturing its own components due to delays in rolling out new technology. 

Chinese shares eked out gains after big falls late last week, with CSI300 index rising 0.5 per cent. Meanwhile, S&P 500 futures were last up 0.4 per cent in volatile trading, as Japan’s Nikkei fell 0.5 per cent.

US secretary of state Mike Pompeo renewed US-Sino tensions last week, saying America and its allies must use “more creative and assertive ways” to pressure the Chinese Communist Party

“President [Donald] Trump used to say China’s President Xi Jinping is a great leader. But now Pompeo’s wording is becoming so aggressive that markets are starting to worry about further escalation,” said Norihiro Fujito, chief investment strategist at Mitsubishi Securities. 

Hopes of a quick US economic recovery are grinding to a halt as the rate of coronavirus infections shows no sign of easing.

The US government may be forced to inject fresh support into the economy, with earlier steps such as enhanced jobless benefits due to expire this month. 

US Treasury secretary Steve Mnuchin has said a financial stimulus package will contain extended unemployment benefits with 70 per cent “wage replacement”. 

Concerns about the US economic outlook have weighed on the dollar, with the dollar index dropping 0.3 per cent to its lowest level in nearly two years. 

Against the yen, the dollar today slipped 0.5 per cent to 105.6 yen — a four-month low — while the British pound hit a four and a half month high of $1.28.

Oil prices dipped on concerns about mounting US-China tensions. Brent futures fell 0.46 per cent to $43.14 per barrel while US crude futures shed 0.44 per cent to $41.11. 

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