By Barani Krishnan
Investing.com - It was just a 24-hour retreat, but gold is back to its previous $1,700 perch after President Donald Trump threatened China with fresh tariffs by suggesting Beijing’s irresponsible handing of its coronavirus pandemic was what led to the virus' major outbreak in the U.S.
“Gold prices are rallying as economic uncertainty now must deal with a potential return of tariff threats from President Trump,” said Ed Moya, analyst at New York-based OANDA. “The global economic recovery needs a lot to go its way for the upcoming recession to be a short one.”
Gold futures for June delivery on New York’s COMEX settled up $6.60, or 0.4%, at $1,700.90 per ounce. For the week, though, it fell nearly $35, or 2%, accounting for the return of risk appetite to Wall Street earlier in the week on signs of progress in a potential Covid-19 drug meant for intubated patients.
Spot gold, which tracks live trades in bullion, jumped $16.30, or 1.%, to $1,702.88 by 3:20 PM ET (19:20 GMT). It fell 1.7% on the week.
Trump said late on Thursday his trade deal with China, the first phase having been signed only in January, was now of secondary importance to the pandemic, which he blames Beijing for.
“Gold’s bullish outlook was mainly comprised of the growing stimulus efforts from the central banks worldwide, but now it seems it could also be supported by tariff wars between the world’s two largest economies,” Moya said.
But the OANDA analyst also gold’s stay at $1,700 wasn’t tethered and volatility to the downside was possible.
“Throughout past-market crashes, gold typically loses its safe-haven appeal during the panic-selling phase but resumes it once the recovery starts to take form. The U.S. economy is too vulnerable right now, so President Trump will likely not follow through on these latest tariff threats.”
Joshua Graves, senior market strategist at RJO Futures in Chicago, had a similar view, saying the most important level to watch for gold bugs to watch was the recent high of around $1,790.
“Unless this level specifically is taken out you can’t make a case for a bull run beyond that,” Graves said. “There must be something new that develops to give the bulls a boost and a stock market selloff won’t do it. We’ve seen that before.”