Gold prices ended higher on Friday as testiness between the U.S. and China fed risk-off sentiment, drawing investors into assets considered to be havens, including government debt and the Japanese yen.
However, analysts said continuing plans to reopen economies that have been frozen by the COVID-19 pandemic and hope for remedies for the virus have limited the upside in precious metals, sending gold lower for the week.
Gold for June delivery on Comex GC00, +0.61% GCM20, +0.61% rose $13.60, or 0.8%, to settle at $1,735.50 an ounce, after the yellow metal dropped 1.7% on Thursday marking its first decline three sessions. Front-month contract prices saw a weekly loss of 1.2%, according to FactSet data.
Meanwhile, July silver SIN20, +1.47% added 32.9 cents, or 1.9%, at $17.693 an ounce, after falling 3.7% in the previous session. Prices were up nearly 3.7% for the week.
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China moved to impose new national-security laws on Hong Kong. The proposed laws would challenge the semiautonomous country’s governance and appeared to draw a swift rebuke from the U.S.
The Wall Street Journal on Thursday reported that U.S. senators were introducing a bipartisan bill that would sanction Chinese officials and entities who enforce the new Hong Kong laws, and penalize banks that do business with the entities.
With the crisis in Hong Kong picking up, stock markets in Asia and the U.S. declined, resulting in “safe haven buying for both gold and silver,” said James Hatzigiannis, chief market strategist at Ploutus Capital Advisors.
The “U.S. has threatened a very harsh retaliation if China challenges Hong Kong’s autonomy, which then could lead to U.S. implementing more tariffs,” he told MarketWatch. Those tensions aren’t likely to influence gold for long as the market tends to overreact once news hits, but Hatzigiannis said he expects gold prices to go up regardless of that.
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Elevated tensions in Asia were reflected in a more than 5% tumble in Hong Kong’s Hang Seng HSI, -5.56%, the worst day since 2015.
“Traders around the world are playing the waiting game to see details of the new Hong Kong law to gauge how severe the terms are,” Stephen Innes of AxiCorp said in a commentary.
The bill proposal comes amid heightened friction between the Trump administration and the China, with Beijing being blamed for mishandling the coronavirus, which was first identified in Wuhan in December and has infected more than 5.1 million people globally.
Against the backdrop, safe-haven assets, including the 10-year Treasury note TMUBMUSD10Y, 0.660% have been drawing bids, pushing prices for government paper up and yields lower. The 10-year note was most recently yielding 0.661%, compared with 0.677% Thursday afternoon. Lower yields can also help push investors into bullion which doesn’t offer a yield.
Meanwhile, the yen USDJPY, -0.03% was up slightly against the U.S. dollar changing hands at 107.58, but the buck overall was gaining 0.4% versus a basket of a half-dozen rival currencies, including the yen, as gauged by the ICE Dollar Index DXY, +0.39%. A stronger dollar can cap gains in asset priced in the monetary unit like gold because it makes them more expensive to buyers using other currencies.
Among other metals traded on Comex, July copper HGN20, -1.64% lost 1.9% to $2.3865 a pound, but ended 2.4% higher for the week, FactSet data show. July platinum PLN20, +2.13% added 2.3% to $886.30 an ounce, building a weekly rise of about 8.5%, while June palladium PAM20, -3.73% fell by 4.1% to $1,977.10 an ounce, still 6.4% higher for the week.
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