Gold rose to its highest level in more than six years as concerns about the global economy made the precious metal more attractive.
Concerns over the global economy come as the U.S.-China trade war intensified with Chinese authorities allowing the country's currency, the yuan, to depreciate against the dollar while"That is the biggest factor because it introduces a whole new set of risks to the equation," said Ryan Giannotto, director of research at GraniteShares. "What's really playing into people's fears is does the depreciation of the yuan signify a larger threat to the economy.
On Monday, China allowed the yuan to weaken beyond 7 per U.S. dollar, marking the currency's lowest level against the greenback in more than a decade. That move led to Wall Street's biggest sell-off of 2019. The People's Bank of China initially quelled escalation fears on Tuesday by pegging the yuan at a stronger-than-forecast level relative to the dollar. However, those worries reemerged after China set the yuan at a weaker-than-expected rate.
China's currency moves came after President Donald Trump announced last week a 10% tariff on an additional $300 billion worth of Chinese goods. Investors are fearful about the tariff because the goods being targeted include consumer products ranging from apparel to Apple products like the iPhone. Trade tensions have helped gold — which is seen as a safe haven because it retains its value regardless of economic conditions — surge this month while stocks have lagged."Although gold futures remain near-term overbought, momentum is decidedly higher," said Tom Essaye, founder of The Sevens Report, in a note. "Fundamentally, the sharp downtrends in bond yields firmly support the bullish case for gold.
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