Gold rallies to new highs on rising China demand, weaker Dollar

LONDON (August 20) 

Gold (XAU/USD) trades up to a new all-time high in the $2,520s on Tuesday on the back of news of solid demand from China, a weakening US Dollar (in which the precious metal is mostly priced), and continued geopolitical risks stemming from the Middle East, where peace talks are at risk of running aground. 

Gold at new high after news of Chinese demand

Gold continues rallying on Tuesday on the back of increased safe-haven demand from China. The People’s Bank of China (PBoC) issued new Gold import quotas to banks which “triggered speculation of a renewed wave of demand,” according to broker SP Angel. Safe-haven demand for Gold in China rose after Chinese 10-year Government Bond yields fell to record lows last week and, as a result, “Chinese buyers are seeking alternative safe-haven protection, with Gold an obvious candidate,” added the broker.

Gold is gaining a further lift as the US Dollar pushes to a new low eight-month low on Tuesday. The US Dollar Index (DXY) fell to 101.76 in early trade – a positive for Gold since the two assets share a high degree of negative correlation. 

Gold may be seeing safe-haven demand after an attempt to reach a peace agreement in the Middle East, spearheaded by US Secretary of State Antony Blinken, stalled with Israel ready to agree but Hamas not because it wants the agreement to include a permanent and not a temporary ceasefire as laid out in the current deal. Hamas further ratcheted up tensions by owning up to a recent suicide bomb attack in Tel Aviv. An Iranian all-out attack against Israel also remains an overhead risk factor. 

FXStreet