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Gold rises ahead of US-China trade negotiations

09 October 2019

North American investors have been a late but important addition to gold's rally this year, adding 62.1 tons to their holdings of the metal through exchange-traded funds in September.

Investors awaited the U.S. Federal Open Market Committee's minutes from its September meeting, due on Wednesday, for clues to whether the Fed will cut rates at its October meeting, in what would be its third interest rate cut for the year.

"Given strained relations with the US, China needs a hedge against its large holdings of the dollar, and gold serves that function", said Howie Lee, an economist at OCBC Bank.

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Neil Wilson, chief markets analyst at Markets.com, says that gold is now a "good buy", and China's increase "chimes with the flows we've seen in recent weeks that's pushed prices a lot higher".

A string of weak US economic data, including sluggish manufacturing activity and a sharp slowdown in services industry growth, heightened recession fears, although Friday's decent jobs report halted bullion's upside.

"The stock market is increasing losses, so gold is taking back the safe haven role", ActivTrades chief analyst Carlo Alberto De Casa said, adding, "The markets are also fearing the trade talks and what's going on with Brexit".

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Top-level U.S. -China trade talks are scheduled to resume later in the week, when Chinese Vice Premier Liu He meets with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin in Washington.

Russia's bullion holdings accounted for around 2,217.68 tons by late July, after racking up another nine tons of the precious metal in just one month, so that since the start of the year, the country's central bank has boosted its gold holdings by a total of 106 tons.

Spot gold rose as much as 0.4 per cent to US$1,511.31 an ounce on Monday (Oct 7) and traded at US$1,505.84 in early London trade. The metal's price has climbed almost 19% since the start of the year.

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Russian Federation also has been adding substantial quantities of bullion; central banks worldwide have snapped up more than 450 mt during the first eight months of 2019, helping push total gold demand to a three-year high, the World Gold Council has said. When the central bank announced a 57 per cent jump in reserves to 53.3 million ounces in mid-2015, that was the first update in six years.

Gold rises ahead of US-China trade negotiations