Gold above $1,500 for first time since 2013

LONDON — The price of gold on Wednesday briefly rose above $1,500 per ounce, a key level last breached six years ago, as investors sought shelter from the fallout of a raging US-China trade war. 

At about 13:35 GMT, gold, a safe-haven favourite, jumped to $1,500.25 per ounce, the highest point since April 2013 and 1.7 per cent higher than late Tuesday.

Investors also sought safety in bonds on Wednesday as they shunned riskier assets such as stocks for the relative safety of government debt.

Official rate cuts from three central banks, including a surprisingly aggressive one by the Reserve Bank of New Zealand, served as a stark warning that a worsening US-China trade conflict is shaking confidence in global growth.

As bond prices surge, their yield or returns to investors fall, with benchmark 10-year government paper in the US and elsewhere dropping to multiyear lows.

French and German bond yields, already in negative territory, even set new record lows, highlighting how safety is now the first priority in the markets. 

“Nobody wants to be vulnerable, everybody is in risk aversion mode, and all ingredients are in place to push yields lower,” Aurelien Buffault, bond manager at Meeschaert, told AFP.

The US-China trade war is the main reason to worry about growth, analysts said, but the outlook for a no-deal Brexit is also weighing on sentiment.

‘Rates falling everywhere’ 

Markets now believe that the world’s key central banks will cut interest rates further to stave off, or at least alleviate, any coming recession, analysts said.

Crucially, the hefty cut by remote New Zealand may be a precursor to deeper US Federal Reserve easing, suggested Ipek Ozkardeskaya, Senior Market Analyst at London Capital Group.

“The surprise rate action from the RBNZ can only spur expectations of a similar size cut from the Federal Reserve,” she said.

US Treasury yields showed a fall of 0.102 percentage points on the day, outdone among developed economies only by New Zealand yields following the rate cut, and Italy.

Ten-year yields elsewhere eased by 0.05 points or more.

“Rates falling everywhere,” observed analysts at Moneycorp.

“They may not exactly be competing but the world’s central banks all seem to be pointing in the same direction towards lower rates. In every case there is concern, to a greater or lesser degree, about the global economy,” they said.

Commodity markets followed the logic of economic worry, with safe-haven investment gold surging and oil, the fuel of economic growth, falling.

“We see the ongoing steep rise in the gold price as an expression of the high risk aversion among market participants,” said Commerzbank analysts.

“Gold is quite clearly still in demand as a safe haven in the current market environment.”

Oil extended already steep weakness after the US Department of Energy reported a surprise increase in inventories — a sign of flagging demand.

European stocks had a rollercoaster session which started on an upbeat note but then turned sour when US stocks fell sharply at the New York opening bell “with escalated US-China trade concerns continuing to weigh on sentiment”, Charles Schwab analysts said.

But as Wall Street came off its morning lows, European equities regained their poise to close mostly higher.